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IT Doesn’t Matter
by Nicholas G. Carr

Reprint r0305b

May 2003

HBR Case Study
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IT Doesn’t Matter


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Leslie Perlow and Stephanie Williams

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Ian C. MacMillan, Alexander B. van Putten,
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Ravi Dhar and Rashi Glazer

The Nonprofit Sector’s
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Bill Bradley, Paul Jansen, and Les Silverman

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Gary Loveman

Don’t Trust Your Gut




by Nicholas G. Carr

As information technology’s power and ubiquity have
grown, its strategic importance has diminished. The
way you approach IT investment and management will
need to change dramatically.


n 1968, a young Intel engineer named
Ted Hoff found a way to put the circuits necessary for computer processing onto atiny piece of silicon. His invention of the microprocessor spurred a
series of technological breakthroughs –
desktop computers, local and wide area
networks, enterprise software, and the
Internet – that have transformed the
business world. Today, no one would dispute that information technology has
become the backbone of commerce. It
underpins the operations of individual
companies, tiestogether far-flung supply chains, and, increasingly, links businesses to the customers they serve.
Hardly a dollar or a euro changes hands
anymore without the aid of computer
As IT’s power and presence have expanded, companies have come to view it
as a resource ever more critical to their

Copyright © 2003 by Harvard Business School Publishing Corporation. All rights reserved.success, a fact clearly reflected in their
spending habits. In 1965, according to a
study by the U.S. Department of Commerce’s Bureau of Economic Analysis,
less than 5% of the capital expenditures
of American companies went to information technology. After the introduction of the personal computer in the
early 1980s, that percentage rose to 15%.
By the early 1990s, it had reached more
than 30%,and by the end of the decade
it had hit nearly 50%. Even with the recent sluggishness in technology spending, businesses around the world continue to spend well over $2 trillion a
year on IT.
But the veneration of IT goes much
deeper than dollars. It is evident as well
in the shifting attitudes of top managers. Twenty years ago, most executives
looked down on computers as proletarian tools –glorified typewriters and

H B R AT L A R G E • I T D o e s n’ t M att e r

calculators – best relegated to low level
employees like secretaries, analysts, and
technicians. It was the rare executive
who would let his fingers touch a keyboard, much less incorporate information technology into his strategic thinking. Today, that has changed completely.
Chief executives now routinely talkabout the strategic value of information
technology, about how they can use IT
to gain a competitive edge, about the
“digitization” of their business models.
Most have appointed chief information
officers to their senior management
teams, and many have hired strategy
consulting firms to provide fresh ideas
on how to leverage their IT investments
for differentiation and advantage.
Behindthe change in thinking lies a
simple assumption: that as IT’s potency
and ubiquity have increased, so too has
its strategic value. It’s a reasonable assumption, even an intuitive one. But it’s
mistaken. What makes a resource truly
strategic – what gives it the capacity to
be the basis for a sustained competitive
advantage – is not ubiquity but scarcity.
You only gain an edge over rivals...