Cloudonomics: The Business Value of Cloud Computing, + Website

Competitiveness Confrontation

So, based on the latest data, the productivity paradox appears to have been resolved: IT can be a good investment and has helped the economy and individual firms. But, to paraphrase the Red Queen Hypothesis, even though a rising tide may lift all boats, that doesn’t help any of them win the race. IT may be a good thing, but is it strategic? Can it help firms successfully compete over the long haul?

Nicholas Carr didn’t think so. In a much-discussed article in the Harvard Business Review that later led to a full-length book, he argued that “IT Doesn’t Matter.”9 To oversimplify his argument—which is well worth a read, whether you agree or perhaps specifically if you do disagree—he claimed that “[a]s information technology’s power and ubiquity have grown, its strategic importance has diminished.”10 In other words, IT can’t be strategic, because it is a ubiquitous commodity, like pork bellies and frozen orange juice. Cloud computing itself wasn’t around when he wrote the article, but he did anticipate “utility” models in his piece and lumped electricity together with IT. Electricity is certainly useful and no doubt enhances productivity. However, he essentially argued, it would be hard to find a company that had developed a strategic competitive advantage due to its mastery of electricity. Certainly, ensuring an uninterrupted supply is valuable, and cost-effective supply contracts are important to the degree to which they are a fraction of the cost structure ...