The End of Corporate IT? Not Quite

Computerworld - When Nicholas G. Carr famously asserted that "IT doesn't matter" in 2003, he backed up his thesis with data gathered by IDC and Orlando-based consulting firm Alinean Inc. After Carr's recent prediction of the end of corporate IT , Alinean CEO Tom Pisello told Computerworld's Kathleen Melymuka that continued research has raised some very interesting findings about the relationship of IT spending and business success.

Is Nicholas Carr on to something in touting the end of corporate IT? Carr's claim that IT has become a commodity utility has fueled a two-year debate on whether technology investments deliver competitive advantage. On one hand, we agree that corporate IT often spends too much to "keep the lights on." Most companies invest more than 65% of IT budgets on basic infrastructure like PCs, servers, e-mail and storage.

But it's important to differentiate between infrastructure investments and strategic investments. Strategic IT investments, especially when closely aligned with business goals, prove that technology can deliver a competitive edge.

What do the numbers say? Tell me what the Alinean/IDC pre-2003 research showed about IT spending and corporate performance. IT spending and performance research have to be examined in context with the market. When Carr used our 2003 research in his original Harvard Business Review article, market conditions were really tough. Back then, we found that top-performing companies, or those with the highest Economic Value Added, were notably frugal with IT dollars. These high performers were spending less than 1% of overall revenue on IT, while the average company spent 3.7% and the laggards were spending 2.7%.

And continued research shows essentially the same thing, right? Yes, top-performing companies continue to be more frugal in their IT spending, spending 0.5% less on IT as a percentage of revenue versus the average company. But the spending gap has narrowed significantly.

Alinean CEO Tom Pisello

What's the significance of this finding? Leaders are incredibly agile with spending. In contrast, average companies and laggards have held IT investment relatively constant, averaging 3.7% and 2.7%, respectively, over the past three years.

Also, when you look at IT spending per employee, the picture changes. Tell me about that. Interestingly, leaders spend more per employee on IT than an average company—in fact, about $500 more each year. IT investments help these companies do more with fewer people, or better manage outsourcing initiatives.