Dear Mr. Carr,
We read your article “IT Doesn’t Matter”, and we share your belief that IT will eventually become a commodity and a potential source of deep financial loss. However, we also believe that if IT is integrated within a firm’s business processes, it can lead to a strong competitive advantage, generate incredible savings, and provide long term success for an organization.
We present for your review a case study from IBM. In the last 10 years, the company was able to save billions of dollars by restructuring its IT processes. In fact, we believe that long term leveraging of IT resources has led IBM to develop more than just a competitive advantage. We believe that IBM has achieved a proprietary advantage.
Facing enormous losses and “structural problems” in 1990, IBM was forced to completely reevaluate its IT-enabled enterprise processes and develop them into one streamlined, integrated and centralized process.
Within the IT Operations, infrastructure was leveraged by:
· Decreasing data centers from 155 to 11
· Developing a single global network and reducing costs by 50%.
· Increased network accessibility, functionality, and reach.
· Shifted to “open source” common standards for info processing (Linux) and from proprietary to industry standard enterprise applications
· Redesigned system development processes to enable modular design and reuse
· Decreased number of global applications
· Reduced IT professional staffing by 60%
IBM was forced to evaluate its Supply Chain as well and leveraged the infrastructure and Enterprise Support Processes:
· Outsourced activities and processes where IBM was not best in class.
· Decreased the number of financial centers and the cycle time for accounting w/ their functional reengineering project.
· Transferred internal IBM shared services and centralized process reengineering infrastructure
· Leveraged end-to-end IT-enabled processes to deliver real-time, actionable information to internal IBM decision makers and to customers, suppliers, and business partners
Ultimately, IBM deployed IT solutions and established its proprietary advantage with a new generation of goods and services that would be difficult to replicate. IT also enabled IBM to streamline its R&D, thus allowing inventions to be brought to the market in less time and with less expense. Lastly, they brought specialized expertise in a wide range of areas that typical organizations could not access.
These advantages mean nothing if the firm is not profitable. These IT innovations have allowed IBM’s internal IT to contribute more 2 billion per year in operating savings. We believe that these advantages are a big reason why IBM’s profits have increased from 3 billion in 2002 to over 8 billion in 2004.
Sincerely,
The Socorro Independent School District.
Scott Phillips
Jennifer Dowdy
Miguel Quinones
Araceli Hernandez