Nicholas Carr, writer of the controversial Does IT Matter? in 2004, is back with claims that utility computing will kill the IT department. Michael Crawford talks to Carr and hears from CIOs who are not ready to turn up their toes just yet. When Harvard Business Review writer Nicholas Carr penned a critique of information technology in 2004 titled "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage", he was met with a level of criticism that recalled the response to Salman Rushdie's publication of The Satanic Verses.
While Carr was not the subject of a fatwa, the reactions of chief information officers, IT managers and almost anyone involved in enterprise computing was extremely negative.
The crux of the book is that IT hardware, software and networks once created barriers to competition in the marketplace. As IT systems have advanced, however, those barriers have fallen. Similar IT systems are commonplace and, as a result, no one company gains an advantage by using them.
The claim was met with much fist shaking and explosive opinion by IT executives. Even if they had little time to read past the front cover, everybody had an opinion.
With the release of Carr's new book The Big Switch: Rewiring the World from Edison to Google, the original premise is pushed even further. It depicts a scenario where the delivery of IT services is done across a commoditised platform, and offers an analysis that compares IT service delivery with the energy services utilities across the United States at the turn of the 20th century.
Alarmingly for CIOs, one of the assertions the book makes is that IT departments are unlikely to survive such a transition.
"IT will have little left to do once the bulk of business computing shifts out of private data centres and into the cloud. Business units and even individual employees will be able to control the processing of information directly, without the need for legions of technical people," Carr writes.
Truth be told, Carr's presumptions, while provocative, are worth serious thought. His predictions are mired in illogic and offer a macrocentric, not overly critical, view of the direction IT is heading. There is no sentimentality or heartfelt pining for all things computerised.
Carr bites the hand that feeds him. That's why his name is recognised and why he has business executives and CIOs talking. And they have not stopped. When "Does IT Matter?" was first published as an article in the Harvard Business Review monthly newsletter in 2003, noted US columnist and fellow Harvard Business Review writer Michael Schrage wrote an opinion piece saying that Carr aimed to be provocative rather than analysing the work involved in turning commodity technologies into value-added business products.
Schrage said Carr knowingly fails to recognise the CIO's ability to transform the economics of innovation, segmentation and differentiation for most businesses in order to make a headline-grabbing case.
In his new book, Carr expands on the commoditisation theme, predicting an entirely different scenario for CIOs in less than a decade. It is one that sees them junking the machinery of IT, such as hardware and software, in favour of managing service delivery of IT from an outside provider. The good news for CIOs is that this shift may mean their roles gravitate towards leading business innovation.
In the long term, he says, the IT department in its present form is unlikely to survive this transition. In broad terms, he suggests the job of running the IT plant will dissolve. The problem dogging CIOs of the future, he says, is that most of their skills may just not be required.
"Ultimately, the CIO will have a different kind of job," he says. "Most IT departments spend dollars on people to maintain in-house computers, software and on other technical gear to run the IT plant. These jobs will eventually go away."
What will be more important, he says, is managing the flow of information through the business. CIOs will still aim for higher-level thinking on ways to automate software and drive competitive advantage through software, but it may fall to non-IT executives to make the decisions.
"Easy-to-use interfaces for products will be the new battleground for competitive advantage and I don't think those skills will reside in the IT department," Carr says. "They'll move into marketing and product development and, as the actual machinery of IT is less important, the software skills and information management will diffuse into business units and departments."
Should the CIO position evolve to leave the machinery of technology behind, the new battleground for competitive advantage will not come from stable or innovative IT services, but in tweaking existing software products used by staff.
But the shift to enterprise computing "in the skies" could be positive for companies, even though the IT department would have to give up control over hardware and software buying and concentrate on the delivery of services.
Carr believes IT departments have to embrace the new model and recognise the shift towards utility computing as a way to make IT cheaper, more efficient and more flexible. Simply, the less time you spend "keeping the lights on", the more creative the IT department or CIO can become.
"IT may employ fewer people, but they'll do more interesting work," he says. "Many of the technology-focused professionals will probably move into the vendor community to run big, centralised IT plants, into jobs where their contributions are technical and mainstream to the business."
However, CIOs are not ready to turn up their toes yet; they believe their future roles will be about more than just IT service delivery. Many see a trend towards the top IT executive becoming increasingly integral to the business rather than fading into the background.
Those we spoke to believe CIOs have an exciting future and say they already play a big part in high-level business decision-making.
Bobby Lehane, CIO at Zurich Financial Services Australia, says an effective CIO is essential in creating or pushing competitive advantage in the financial sector. He asks whether Carr fully understands what a CIO does and says the role itself was long ago absorbed into the business side of many organisations. He argues that the traditional IT plant is already a thing of the past - it is a fully aligned business unit integral to delivering successful results. In the future it will be more fully integrated.
"Having not worked in a CIO role is probably clouding Carr's judgment," Lehane says. "While software-as-a service is a very successful trend, it doesn't marginalise the role of the IT department."
He says Carr's claim, that the CIO of the future will have to manage the flow of information on a higher level, is an outdated idea. CIOs already do that. He says making more effective use of data is crucial to the position, and the old chestnut that IT has to be aligned to the business is just that - a chestnut.
"In our industry, people are getting innovative products and services to market faster and, as a result, retaining and stealing market share," he says. "All these strategies are underpinned by technology and have a huge dependency on the IT department.
"The CIO will be more than the bastion of IT service delivery in the future."
Carr claims in his book that today's senior IT executives could be responsible for little more than tweaking software for internal users in order to create some advantage over competitors using the same applications.
Lehane rejects this, saying CIOs should not be overly preoccupied with honing coding skills - he says the best skill for a CIO in the future is to retain a business focus.
While the enterprise today does not readily accept software delivered via a utility model, competitive advantage in the financial services sector for a company like Zurich involves releasing software and services to customers quickly.
Lehane does hint that convergence of IT services could pose an equally difficult challenge for the CIO of the future.
"If you go back to wholesale banking product development," he says, "a banker or trader will get the application development guys to develop a product so as to get it to the market as soon as possible - thereby stealing the market with that product.
"When competitors are caught up in the race to release a similar product, the benefits for them are diminished as speed to market is important.
"Even if all IT services and delivery mechanisms are commoditised, an organisation needs to focus on more strategic and innovative approaches to IT - it just doesn't stop, like electricity."
Lehane agrees with Carr that if IT services are delivered in a utility environment, a CIO's time could be spent doing higher level thinking. He says that, hypothetically, in a commoditised marketplace, innovating IT services is the ideal situation for a CIO, and a skill they should be aiming towards.
"Software-as-a-service is a trend and will continue to grow," he says. "But I don't think it'll marginalise the role of the IT department.
"It will cause the IT department and CIO to focus more on creating business value-add through IT than the traditional roles do."
Anthony Bereznicki, head of IT service delivery for Cadbury Schweppes Asia-Pacific, agrees with Carr's claims relating to the commoditisation of some IT services, but believes the direction he paints for the CIO is flawed. He believes Carr overlooks the intimacy fostered between the IT department and the actual business.
Bereznicki says the things a CIO or IT staffer needs, such as hardware or specialist skills, are already considered a commoditised service and this neither affects nor jeopardises a CIO's career.
"I agree we're heading to a utility computing approach," he says. "Some standardised services are so easy to get in the outside market, but that's only one part of it.
"The intimacy you need to have with a customer or business creates the bridge of taking a business problem and complementing it with an IT solution - this will never go to a utility market."
For all its strengths, he says, the 100 per cent utility model fails because it assumes companies in different industries want the same applications.
Bereznicki says that if there was a common layer or "exactness" between different organisations in different industries, then the utility model could work, but providing unique application services across a commoditised delivery platform would be hard to sell.
He uses the managed security services model as an example and breaks it down to two parts - policy side and operational. In a commoditised market, he says, the true value of these services only becomes clear after the individual policy is outlined - which may differ from company to company.
"A good analogy is if you look at a street full of houses," he says. "They all get the same power from the same source and what they do with it is the owner's responsibility - the same applies to the IT industry.
"But when you deliver information or applications in a utility environment, you need someone to give guidance and direction to IT and the business on what to do with it - hence the senior IT executive."
Expanding on the commoditisation theme, he says there will always be software in the market that lends itself to a utility approach, and software unique to a company rather than a particular industry.
The onus is on a CIO to work out the right approach, possibly blending the two. He believes the CIO's role will change in the next five to 15 years, but moving towards more value-adding of IT services rather than simply keeping the lights on.
Instead of taking a back seat, the CIO will be vital to integrating the business, not just delivering on service levels.
He says the utility scenario will not be a death knell for the top IT executive, but it would actually create a more challenging job for a CIO, purely because you need someone within an organisation who understands the uniqueness of service providers.
"If you look at it from an IT perspective," he says, "where a utility provider delivers a particular data connection to your mainframe, the way that service is delivered to company A and to company B is different - there's no standardisation.
"There used to be a clear delineation between IT and other departments, but now IT is intertwined into the business. Therefore the CIO's role is, and I'd like to hope will stay, one that has already changed from a cost structure to a value-add."
* In the next decade utility computing could threaten the way IT services are delivered, disrupting the working environment for the CIO.
* Should this happen, CIOs could ditch their technical skills and become high-level thinkers. Either that or just manage IT service delivery.
* CIOs already consider their roles to be that of high-level thinkers.
* CIOs believe the 100 per cent utility model will fail because it presumes all industries want the same applications.
IT IN THE SKIES
The concept behind grid computing, utility computing, on-demand computing and software-as-a-service is not new, and is even referred to as far back as 1961.
The utility computing idea approaches corporate computing on an "as-needs" basis, where an organisation downloads applications off the internet in order to conduct everyday business. The company pays for their use accordingly.
Carr expands on this theme, stating that the corporate data centre could be moved "into the clouds", meaning online data repositories. In this example, search engines such as Google could operate as the database where companies store and access their data, if infrastructure supported the service.
Fairfax Business Media
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