Dustin Wheeler

Dustin Wheeler
Dustin is a technology-driven CPA in Orem, Utah.

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Who says IT doesn't matter?

In an MBA class I’m taking at UNLV this semester, one of my assignments was to read the article IT Doesn’t Matter by Nicholas G. Carr, which was published in the Harvard Business Review in May 2003.  The title, which certainly provides some shock value, may be misleading without further explanation.  Carr doesn’t imply that IT is unimportant in an organization, but rather that it should not be considered a strategic resource.

The most interesting part of the article is Carr’s argument that IT, as an infrastructural technology, is becoming a commodity just like the railways in the mid 1800s and electric power in the early 1900s.  As a commodity, IT becomes something that every business has and provides no competitive advantage.

I’m not saying that Carr is wrong, but I have a hard time comparing IT to commodities like railroads and power plants.  Unlike other commodities, IT continues to evolve rapidly.  For example, the graph on page 10 of the article measures the number of host computers on the Internet as a means to compare it to other commodities.  In the changing world of IT, would this be better measured by smartphones, tablets, or another new device in a few years?

The article made me ask myself, “does IT provide a competitive advantage to an accounting firm?”  I think it does – perhaps not so much the hardware and software themselves, but more in the way that they are used.

6 comments to Who says IT doesn’t matter?

  • I agree with your conclusion about IT providing an advantage. I work for a very technologically progressive CPA firm, and I’m 100% positive that our IT department’s skills give us a competitive advantage. The rapid pace of development coupled with applying technology to the unique needs of CPAs requires very specialized skill. Not just any old IT professional could step in and do just as well.

  • Interesting ideas, Dustin, thanks for sharing them!

    There are a lot more ways to implement IT in an office than there are ways to use railroads, or to wire electricity in a factory. The software side of IT is in the realm of ideas (not things) so there is tremendous variability in what can be implemented. I think it does matter.

  • All interesting thoughts. I agree with your approach, Dustin.

    To me, I think that strong, Internet access is vital – it is a road, bridge, infrastructure. What each firm does with that road way is the defining moment – to build and improve (more businesses and communities) or to use it merely as a means to pass through from a starting point to a destination.

    I’ve witnessed a firm telling clients the reason they could not complete their monthly, clients’ returns on time last year is because the firm changed software … software is merely a tool to report/deliver the fundamentals. I agree with you that how one uses the tools makes all the difference.

    Is this the same author as: “The Shallows: What the Internet is doing to our Brains?” – Where the argument is that the Internet is making us dumb? For me, IT and the Internet have channeled my core competencies and focus — I would not be able to have a specialized client base if I could only serve my local viewing area.

  • Kara, it is the same author. I have heard of that book, but haven’t read it.

    I’m happy to see three comments that support my beliefs!

  • Heber Longhurst, CFA

    It depends on your definition of commodity. In economic theory the word “commodity” is used to refer to a good or service which is basically the same coming from one producer or from another producer. This definition is usefull in establishing whether the market is a monopoly, oligopoly, monopolistic competition or pure competition. Some basic examples of commodities are electricity, oil, corn, wheat, precious metals, cell phone minutes, bandwidth etc. In these types of markets the only way one company can compete with another is by lowering the price.

    In my line of business trading securities is often referred to as a commodity. Whether you buy XYZ stock with brokerage ABC or brokerage X really makes no difference, you gave somebody money and you got a stock. The main way to compete is through lowering comissions. There are of course, ways to time trades to get the best prices and strategies handle large volumes and/or to obfuscate the origin of the trades. However, everybody knows these strategies and all brokerage houses use similar strategies!! The differentiation is skill at using one strategy better than your competitor. Advice as to which stock to buy and how to build a portfolio of course is highly diversified and is where we have more pricing power.

    In many areas of accounting and finance IT has become so widespread that you can suffer a CONSIDERABLE DISADVANTAGE if you DON’T use IT (pencil and paper buddy!) but it is probably much more difficult to produce a competitive advantage by simply using IT.

    What I find in my line of business isn’t that we need great computer programers, but that we need computer programers who also understand finance and who understand intricately my constant IT needs. We really have some great guys who integrate our many databases into the analysis and publication process and we moving aggressively to integrate our research into our clients IT processes and analysis. While this is great and it makes things easier for us and our clients I wonder if we are doing anything different than our competitors.

    At the end of the day, I think our clients chose one research provider over another based more on the quality of our insights and less on our IT platform (although the lack of a solid IT platform would be a significant competitive DISADVANTAGE).

    I don’t know accounting as well as you do, but I wonder if you look around you whether it be tax accounting, auditing, corporate finance etc if there is anybody who is significantly better than anybody else simply because of a better IT platform. I am sure you will find laggers who are becomming obsolete by having a clunky and substandard IT platform (it is crucial!!!). But, are the leaders more competitive because of their IT platform or because they provide better tax strategies, more accurate and timely information and the courage to cry foul when they discover shennanigans in an audited company?

    It is difficult to think of IT as a commodity in the sense of electricity and bandwith and it is probably not completely accurate due to the incredible rate of innovation and improvement in the field of software and integrating IT into a company’s operations. I use very sophisticated IT systems daily! Systems which are fully integrated globally across our operations and in some cases even with customers’ operations.

    However, I think it is easier to be caught in a competitive disadvantage because of substandard IT platform than it is to garner a competitive advantage (at least a sustainable, long-term advantage). Even with the very best IT platform in the world a company would not be competitive if its employees knew how to (1st) do their jobs excellently and (2nd) take FULL advantage of the IT platform.

  • Heber Longhurst, CFA

    In Tim’s case I would say the competitive advantage comes not simply because his company has IT but because it is integrated well into the process of the company AND because the CPA’s know how to use it! (In most cases IT platforms are underutilized).

    In Kara’s case I would say that the advantage comes not simply because of IT but because of her desire and ability to leverage IT to channel core competencies and focus.

    I agree with Shannon, in the sense that IT is really in the realm of ideas, not things. IT can make or break a company.

    I guess my main argument is that the bottlekneck isn’t so much having or not having an IT platform but that what is crucial is having an intelligent, practical, integrated IT platform AND having trained employees who not only know how to use it but who actually use it.

    The CFO of one of the companies I cover came out and announced that going forward all their margins were going to improve and their working capital cycle and financial expenses were going to decrease because of their great new IT platform. They really talked it up! It was going to be a global system, fully integrated with operations, marketing and sales, human resources, finance, accounting and was also going to be integrated with financing entities, outsourcing organizations etc and management was going to be fully, completely and precisely informed of how everything stood at all times. They were disappointed when analysts didn’t soak this up and give the company a higher recommendation than their peers. The fact is that in a matter of weeks every one of their peers upgraded their IT platform to something similar. They are ALL seeing less waste, improved margins, better working capital, decreased cash flow cycles and better decision making. If any one of them had decided to forego improving their IT platform they would be at a competitive disadvantage. But as things stand, nobody’s competitive advantage comes from IT alone.

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