Is IT hype or hope?

Does IT matter? Information Technology and the Corrosion of Competitive Advantage by Nicholas G. Carr; Harvard Business School Press, 2004; $26.95.

Outsourcing to India: The Offshore Advantage by Mark Kobayashi-Hillary; Springer-Verlag; Euro 49.95/Rs.2,885.

A FEW weeks ago, the world's biggest software company, Microsoft, created a sensation in the business world by announcing a huge bonus for its shareholders. The special one-time dividend of $3 a share added up to a $32 billion bounty - and was quite unprecedented, coming from an organisation that believed in putting most of its profits back into its business.

The reason for the payout was obvious according to many analysts, if not explicitly stated: Microsoft did not have too many ways to invest productively its huge cash reserves. It was becoming increasingly difficult to find new and innovative ways to make money in the software business. Were the dizzy years of vertical growth over for the fastest growing industry in the world?

One man thought so - and explained why, in an article on the editorial page of The New York Times. "It is ... a fundamental, if often overlooked, characteristic: software never dies. Machinery breaks down, parts wear out... but software never decays."

For software companies to grow, he added, they have to give buyers good reasons to throw out perfectly serviceable versions of programmes and install new ones in their place. Until recently, that has not been a problem. But now the software upgrade cycle was slowing. Customers were tired of upgrading their Windows operating system or the Office suite on their desktop computers every year or so - and paying for it. Personal computers were now so good that there was not all that much, new, that one could do with it, year on year. "Why fix what is not broken?" felt the average buyer. And, suggested Nicholas Carr, the world's most famous software company must resign itself to a more sedate, less spectacular rate of growth in its middle age.

It was a typical Carr statement - guaranteed to ruffle a lot of feathers in an industry that has long felt that it can do no wrong. Just over a year ago, he had provoked a firestorm of protest when in an article in the May 2003 issue of Harvard Business Review, he suggested that "IT does not matter". As computing devices became more powerful - and widely used - there was less and less reason to upgrade them. The game was now in the numbers - not in the innovation. In other words, IT was fast becoming another commodity - standardised, more affordable, rather than proprietary and `geeky'. After all, what is really different between one PC brand and another? They had to be almost identical in form and function. So the makers could no longer make money by being different - they had to sell more, and sell cheaper.

Carr added what sounded like an outrageous piece of advice to the industry: "Follow; do not lead". In other words, you can save costs by watching the market, buying cheap, and avoid the mistakes of the early movers.

A year later, Carr, a former Executive Editor at the journal where he first aired his views, toned down the title somewhat, but unrepentantly expanded his theory into book length. As the dust jacket of Does IT Matter? gleefully proclaims in blurbs, comments from IT head honchos, have ranged from "Hogwash!" (Microsoft CEO Steve Ballmer) to "... Dead wrong" (Hewlett Packard's Carly Fiorina). But a week after Microsoft decided to give away billions of dollars it could not gainfully spend, HP, in an August 13 announcement, was announcing quarterly losses in some departments of its business - and the consequent rolling of three corporate heads: news that saw a market loss of $8 billion by the close of trading on that day.

Clearly Carr's suggestion that it may be time to separate hype from blind faith in all things high tech was puncturing some high-profile egos - but did it stand critical scrutiny? It all depends on where one was standing.

In Singapore, Carr was star speaker at the Regional Infocomm conference that heralded the biggest IT show in Asia. The organisers lined up an analyst to articulate the industry response to Carr's loaded question; but among the dozens of young Asian technocrats, many from developing nations, who jostled to be heard at question time, the idea that IT may not be the panacea that an industry driven by fierce competition suggested, seemed less provocative, even plausible.

But talking on the sidelines of the conference with this writer, Carr was a little more specific: His amber signal about IT was directed more at large enterprises, which sunk millions of dollars into IT infrastructure, just because everyone else did it. It was a case of those who had enough `asking for more'. On the other hand, he felt, the wrong message could be read into electoral reverses in States like Karnataka and Andhra Pradesh, which were seen to be dumping governments that were perceived to be IT friendly. "If they had the best infrastructure and services, they might not need IT. But precisely because there is some way to go, they need IT to get there," he added.

Carr's relentless questioning through this book, articles and talks, of the precise importance that should be accorded to IT, may have one salutary effect, even if his target audience is unrepentant. It will encourage countries like India, with scarce resources to cast a beady eye on ambitious IT initiatives in governance, triggered by commercial hype and pressure from `box' and `solution' sellers. It will hopefully prod them into doing a cool cost-benefit analysis - where the benefit is a tangible enabler of better quality of life for their people, rather than a showcase for buzzwords like `e-nabled' and `wired'.

"Life is unthinkable without the advances of the 19th century", Carr suggests, "Not just rail, telegraph, telephone, and electricity but also the internal combustion engine, refrigeration, air-conditioning, photography, and indoor plumbing. The same cannot be said of information technology. Ask yourself which you would rather do without: Your computer or your toilet? Your Internet connection or your light bulbs?" (The New York Times, July 23).

THE subtitle of Nicholas Carr's book - "IT and the corrosion of competitive advantage" - might well be the coda for another recent book aimed at the industry. British writer and technology consultant Mark Kobayashi-Hillary has compiled a guide that may become required reading for every international technology company hoping to cut costs by locating some of its services in India.

Outsourcing to India: The Offshoring Advantage is something a visiting American executive from Silicon Valley might pick up in the departure area of San Francisco airport, as he begins his journey to Bangalore. It is guaranteed to keep him or her, hooked - even forsaking the headphones and the in-flight movies. A racy read, the book covers all bases - a potted guide to Indian history, culture and government; the regulatory environment; the different types of off-shoring; brief portraits of the leading Indian and international companies already in India; and a comparison of various city options for subtle shades of outsourcing and advice on the possible pitfalls and roadblocks, some of them cultural. The book is always upbeat and friendly and could end up doing for the Indian outsourcing opportunity what the Lonely Planet guides do for tourism.

Seated among the bookshelves of the Oxford Bookstore within Bangalore's Leela Galeria in early August, Kobayashi-Hillary led a spirited discussion with readers on the Indian edge in outsourcing. Beside him was Mahesh Ramachandran, London Business School Sloan Fellow for 2005, on a year-long sabbatical from his job as IT Strategy Manager for Ford Europe. The two are on a research trip in India for their forthcoming book "Beyond BPO". "I do not see India losing her advantage in Business Processing Outsourcing for at least a decade," says Mark, in spite of the competition posed by Indonesia, the Philippines and China.

And to retain its edge, he sees players here moving into what the co-writers call KPO - knowledge process outsourcing. In a seeming illustration of Nicholas Carr's premise, they suggest that much of this may have nothing to do with IT. "India has a huge potential resource by way of skilled lawyers and chartered accountants", they add. The preparation of a patent application or a tax return could be done gainfully by Indian experts working for firms abroad. Similar opportunities lay in drug development.

With a canny mix of its talented workforce, much of it in non - IT arenas, India could well have hundreds of international companies mouthing the title of Mark Kobayashi-Hillary's recent article in The Observer, London: "Why we are all going to India."