Rebirth: Technology still pays

If you’re a typical CIO, the analysts tell us, you’re bewitched, bothered and bewildered. You’re uncertain about which way to jump. And if you’re a CEO, you’re a little skeptical about the value of IT right now.

No generalization is worth a damn, of course. The analysts also tell us that “”progressive””

companies, the “”innovators,”” know exactly what they’re doing and have continued to make strategic investments in IT through hell and high water, an example to all.

Generally, though, it has not been a happy time for IT departments these past few years. Will that change in 2004 and 2005? Maybe. We think so. Then again, maybe not.

“”Cynicism about IT is as strong as I can remember it,”” says IT guru Don Tapscott, an author of best-selling business books, sought-after conference speaker and the CEO of Toronto-based New Paradigm Learning Corp.

Tapscott, who is also adjunct professor in the Joseph L. Rotman School of Management at the University of Toronto, can remember a long way back. He’s been thinking and writing about the role of technology in business for a quarter of a century.

A number of factors in recent years have created an atmosphere of confusion about that role and about the value of IT, he says.

The bear stock market and depressed economy in the U.S. haven’t helped. In the dot-com aftermath, some CEOs have been inclined to “”throw out the IT baby with the dot-com bath water,”” as Tapscott puts it.

And then that old bugaboo, the “”productivity paradox”” — a statistical anomaly suggesting increased IT spending does not produce commensurate increases in worker productivity — has reared its ugly head again. Not that it was ever far from CEO consciousness.

A provocative article called “”IT Doesn’t Matter”” by independent business writer Nicholas G. Carr, which appeared last May in the influential Harvard Business Review, stirred the paradox pot, Tapscott says.

Carr argued that IT’s strategic value has diminished as its presence and power have grown. Technology has become so commoditized, he contends, that it is no longer possible to wring competitive advantage from it. Tapscott disagrees, naturally, but that’s another story.

“”So all these CEOs,”” he says, “”are dropping the article on their CIO’s desk and asking, ‘How can we cut IT spending?’ It’s created an environment [in which CIOs are like] deer caught in the headlights.””

Other analysts and consultants see the same malaise, though they may cite different evidence. The Innovator’s Advantage, a 2003 report from Accenture on a global survey of senior executives, concludes that CIOs are fundamentally uncertain about what to do next.

“”Everybody bulked up on ERP (enterprise resource planning systems) to get through Y2K,”” notes Toronto-based Accenture partner Blake Hanna. “”Everybody did procurement [systems]. Now it’s less clear how you use IT to break away from the pack. We see lots of CIOs at Comdex, anxiously waiting to see what the next wave will be.””

Homan Farahmand, vice-president of strategic solutions at Meta Group Consulting in Toronto, sees the fear, uncertainty and doubt springing more from a backlash to cost- and time-overruns on those big IT implementations of the late 1990s and early 2000s – and their frequent failure to deliver promised benefits.

“”There is a perception that many IT organizations were burnt badly because of their lack of attention to planning for new technology, and because they didn’t get value out of those investments,”” Farahmand says.

TURNAROUND AHEAD

The result, whatever the root causes, is that IT spending has been down sharply for 24 months or more.

Many analysts, however, are predicting 2004 will be a turn-around year. “”It’s reached bottom,”” says Farahmand.

Blake says Accenture has already seen an upswing in project approvals in the last 12 months. Meta Group’s research division is expecting a modest increase in IT spending this year. It is less optimistic than many analyst organizations, however. Some are calling for increases of as much as four and five per cent, Farahmand notes.

What will loosen the corporate purse strings for CIOs — if indeed they loosen at all?

Tapscott believes the push for “”transparency”” — the subject of his latest book, The Naked Corporation — will be one major motivator. “”It has big implications for IT executives,”” he says.

Companies are naked anyway, Tapscott and co-author David Ticoll argue, thanks to the new reporting regulations and the ease with which the Web lets stakeholders find out what corporations are doing. So they had better, as the book says, “”be buff.””

The smartest companies now understand that embracing transparency is actually good for business in the current climate, Tapscott says.

It goes beyond fiscal transparency. Some North American firms, he notes, are even embracing that erstwhile left-wing-pinko notion of sustainability – building a business that doesn’t actually rape the planet or ultimately drive the global economy into the dirt.

“”It you want to be able to tell what your strategy for sustainability is achieving, if you want to try to be an open enterprise,”” Tapscott says, “”you basically need systems to measure what you’re doing and report it.””

Existing customer and employee relationship management tools need to be upgraded to add new inputs and outputs, he says, and emerging partner relationship management tools and tools for managing relationships with shareholders and other communities should be added to the IT agenda.

This is not just a Tapscott hobby-horse. Farahmand also cites the need for transparency as a key driver for new IT projects. Look for more corporate governance and business intelligence systems, he says.

TECHNOLOGY AND INNOVATION

All three of our virtual panel members say also that recognizing the value of business and technology innovation is another key driver of IT initiatives.

Accenture defines innovator companies by their superior return on shareholder value. It notes that they are more likely than others to set a strategic course, which almost invariably involves investing in IT, and then stay the course even in the face of economic turmoil.

Tapscott goes further. Companies that have relied on and invested heavily in technology to drive their businesses in recent times — Dell and Nokia are prime examples — have been among the most successful. Many companies that have historically been followers are twigging to the importance of technological innovation.

But it’s clear it will take more than just dabbling in the latest hot new technologies to replicate the performance of a Dell or a Nokia or any of Accenture’s “”innovators.”” As Tapscott says, “”It’s all about the business, stupid.”” In other words, technology for the sake of technology never has and never will do a damn bit of good to anyone. Only when it is a slave to clearly formulated and articulated business strategies will IT deliver real benefit.

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