Does IT Matter?

IT Doesn't Matter. That is the title of an article that the May 2003 issue of the Harvard Business Review has carried.

Obviously, it catches the eye of all those involved with information technology (IT). The author, Nichlolas G Carr, argues that IT is no more a strategic resource because of its ubiquity. In his view, a strategic resource is one that is scarce and, therefore, gives a sustained advantage to its user. IT, on the other hand, has become cheap and accessible to all and, therefore, IT resources have become "costs of doing business that must be paid by all but provide distinction to none".

Looking at it from a historical perspective, at one point of time, railroads, telephones and even electricity provided real advantages to those who used them. As the availability increased to all, they became commodity inputs and their competitive advantage vanished. In the case of IT, from a sub 5 percent share of capital spend in 1965 in the US, the share rose to nearly 50 percent of the capital spend in the 90s, points out the author. This has led to a situation where IT is essential to business but is not a strategic input. Organizations cannot do without it- but having it does not offer an overwhelming competitive advantage. Therefore, organizations today have to focus on the vulnerabilities of using IT and not on the opportunities that it provides. That is causing a sea change in the way the markets are evolving.

Organizations in the future will spend less on IT, will not always want to be the leaders in technology implementation and will focus on the vulnerabilities of using IT and not the opportunities it affords. And the suppliers of IT will sell the products like commodities, leading to a lowering of margins. Sellers will seek to position themselves as utilities rather than product suppliers as they battle sluggish product demands.

While this could be the emerging reality for the developed world, the situation is not the same in developing countries like India where a Rs 30,000 crore domestic market and 5 million PCs is a long way off from IT omnipresence situation. IT has not reached anywhere near the capital spend to GDP ratio (it stands at near 2.5 percent) of the developed world and nor has it become available to all. The process of technology induction and absorption is still a decade, if not more, behind the western world. While the latest technologies and products based on these are available, their diffusion and usage is far behind. The concerns that India-and other developing countries have- are completely different from those that the developed world is waking up to.

Take the case of commoditization. IT products are sold and used like commodities in the western world. Can they be sold as commodities in India? Yes. Will that be the best option? No. Simply because the backend systems and processes are not in place. Buying a PC and plugging it into the network is not enough till the hardware and software backbone on the network is completely tested and robust. That is simply not the case in India.

Take the examples of many computerized services on offer today. Mobile phone billing, bill payments of utilities, banking transactions and many more. If you have used these services, you would have experienced the number of glitches that exist. The computers are there, the voice recordings are there, the call centers are there but the processes are not there. Go beyond the basic questions and the operators can only promise to get back.

I have just finished making a call to an online bill payment agency that has not processed my bills on time. This is my third call and I am told that my problem has been referred to Mumbai and someone will get back. My home loan installments are running into a problem. I have paid them through collection boxes, they have been debited from my account but the records are available again only in Mumbai. So my next installment cannot be released.

My daughter's mobile is stolen and it is reported to the operator within three hours. She cannot get the same number till some complex procedures are followed including getting the local police station to register a first information report. Some old bill copies also have to be submitted and these are not available. Worse still, all this information is available only after a few telephone calls, two personal visits and a lot of discussion. Three weeks later, a bill arrives with an extra two weeks' rental because the billing department does not have intimation about the disconnection. In the meantime, my daughter has just taken a new connection from a different operator. It is far simpler.

Mind you, the people are by and large helpful, the technology front ends are in place and the intentions are good. The backend and the processes are just not there. And this is the situation in large organizations that spend huge amounts on IT infrastructure and have large IT departments. How would smaller organizations with rudimentary software provide customer services if IT was sold to them just as a box? There is a huge unfulfilled need for decent software that can manage complex customer interface relations. Similarly, there is no danger of IT growth slowing down in India. It is nowhere near saturation point. In fact, not more than 30% to 40% of organizations are computerized and even when they are, they have technology islands. Complete integration of operations with technology is just about starting - and that too in a few sectors only.

Shyam Malhotra

shyamm@cmil.com