How important Information Technology for getting a competitive edge? Due to economic slowdown in technology and banking sectors, thanks to sub prime crisis in US, firms are making relentless efforts to cut operating costs. Investment in Information technology, once perceived as an unavoidable investment for getting an edge over other competing firms, now becoming dollar sucking liabilities for many. New investment in ERP systems, new data bases, new and futuristic technologies are seen as costly affairs and many firms have valid reasons not to do so. For firms who already have legacy IT infrastructure, 70% of their IT investment goes to maintain old servers, desktops, printers, softwares, applications etc. For finance department the most important question to ask, do these investments give good returns?

Probably Nicolas Carr from Harvard Business School has an answer. HBR published Carr’s most debated article “IT Does Not Matter” in May 2003 issue. Carr argued that over a period of time role of information technology will be seen as a hygiene factor for organization, a mandatory stuff but can’t be used to get competitive advantages over competitors.

IT applications are becoming more and more cheap and standardized. Probably all your competitors have the same set of applications, softwares, servers, database running in their organizations. It is mandatory to have a set of standardized softwares and applications or information system like MS office, outlook etc. to run day to day business. It is like wearing a good dress before going for an interview. It’s mandatory, you can not neglect it and probably all other aspirant is doing the same. But does it guarantee you positive result in interview?  Obviously not.

Last Saturday we had case on airline reservation system SABRE. Late 1960s, 70s, 80s American Airlines used SABRE as a tool get huge competitive advantages over competitors. As time passed by other players realized the importance of having a computer reservation system of their own and started investing huge money to built one.  Few sued American airlines for allegedly unethical use of SABRE. Over the years the role of reservation software changed a lot. Today almost every airline is using SABRE as a reservation system, and needless to say, none can solely rely on SABRE to get an edge over peers.