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IT Doesn’t Matter The Idea in Brief To beat your competitors, are you devoting more than 5. If so, you’re not alone.

Businesses worldwide pump $2 trillion a year into IT. But like many broadly adopted technologies—such as railways and electrical power—IT has become a commodity. Affordable and accessible to everyone, it no longer offers strategic value to anyone. Scarcity—not ubiquity—makes a business resource truly strategic. Companies gain an edge by having or doing something others can’t have or do.

In IT’s earlier days, forward- looking firms trumped competitors through innovative deployment of IT; for example, Federal Express’s package- tracking system and American Airlines’ Sabre reservation system. Now that IT is ubiquitous, however, we must focus on its risks more than its potential strategic advantages. Consider electricity. No company builds its strategy on its electrical usage—but even a brief lapse in supply can be devastating. Today, an IT disruption can prove equally paralyzing to your company’s ability to make products, deliver services, and satisfy customers. But the greatest IT risk is overspending—putting your company at a cost disadvantage.

Make IT management boring. Instead of aggressively seeking an edge through IT, manage IT’s costs and risks with a frugal hand and pragmatic eye—despite any renewed hype about its strategic value. Worrying about what might go wrong isn’t glamorous, but it’s smart business now. The Idea in Practice To avoid overinvesting in IT: Spend Less. Rigorously evaluate expected returns from IT investments. Separate essential investments from discretionary, unnecessary, or counterproductive ones. Explore simpler and cheaper alternatives, and eliminate waste.

Example: Businesses buy 1. PCs annually—yet most workers use PCs for simple applications that require a fraction of their computing power. Start imposing hard limits on upgrade costs—rather than buying new computers and applications every time suppliers roll out new features. Negotiate contracts ensuring long- term usefulness of your PC investments. If vendors balk, explore cheaper solutions, including bare- bones network PCs.

Also assess your data storage, which accounts for 5. IT expenditures—even though most saved data consists of employees’ e- mails and files that have little relevance to making products or serving customers. Delay IT investments to significantly cut costs and decrease your risk of buying flawed or soon- to- be obsolete equipment or applications. Today, smart IT users hang back from the cutting edge, buying only after standards and best practices solidify. They let more impatient rivals shoulder the high costs of experimentation. Then they sweep past them, paying less while getting more. Focus on Risks, not Opportunities.

Many corporations are ceding control over their IT applications and networks to vendors and other third parties. The consequences of moving from tightly controlled, proprietary systems to open, shared ones? More and more threats in the form of technical glitches, service outages, and security breaches. Focus IT resources on preparing for such disruptions—not deploying IT in radical new ways. In 1. 96. 8, a young Intel engineer named Ted Hoff found a way to put the circuits necessary for computer processing onto a tiny 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, ties together 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 systems.

As IT’s power and presence have expanded, companies have come to view it as a resource ever more critical to their success, a fact clearly reflected in their spending habits. In 1. 96. 5, 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 1. By the early 1. 99. 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 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 talk about 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. Behind the 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 by having or doing something that they can’t have or do. By now, the core functions of IT—data storage, data processing, and data transport—have become available and affordable to all. Their very power and presence have begun to transform them from potentially strategic resources into commodity factors of production. They are becoming costs of doing business that must be paid by all but provide distinction to none. IT is best seen as the latest in a series of broadly adopted technologies that have reshaped industry over the past two centuries—from the steam engine and the railroad to the telegraph and the telephone to the electric generator and the internal combustion engine.

For a brief period, as they were being built into the infrastructure of commerce, all these technologies opened opportunities for forward- looking companies to gain real advantages. But as their availability increased and their cost decreased—as they became ubiquitous—they became commodity inputs. From a strategic standpoint, they became invisible; they no longer mattered. That is exactly what is happening to information technology today, and the implications for corporate IT management are profound.

Vanishing Advantage Many commentators have drawn parallels between the expansion of IT, particularly the Internet, and the rollouts of earlier technologies. Most of the comparisons, though, have focused on either the investment pattern associated with the technologies—the boom- to- bust cycle—or the technologies’ roles in reshaping the operations of entire industries or even economies. Little has been said about the way the technologies influence, or fail to influence, competition at the firm level.

Yet it is here that history offers some of its most important lessons to managers. A distinction needs to be made between proprietary technologies and what might be called infrastructural technologies. Proprietary technologies can be owned, actually or effectively, by a single company. A pharmaceutical firm, for example, may hold a patent on a particular compound that serves as the basis for a family of drugs. An industrial manufacturer may discover an innovative way to employ a process technology that competitors find hard to replicate.