In 2003, technology guru Nicholas Carr published a paper asking the simple question: "does IT matter?" His thesis was that Information Technology will become just another business tool, so ingrained in the day-to-day running of a business that it will become almost invisible and far from the exciting growth industry it once promised to be. In essence, he implied, IT would become a utility. Like electricity, it costs business a lot of money, but doesn't bring any competitive advantage in its own right.
Certainly, much of IT's role is about simply 'keeping the lights on' – there are few white collar jobs these days that do not involve switching on the PC in the morning and firing up Lotus Notes or Microsoft Outlook. And when the server crashes, today's workers often seem at a loss as to how to remain productive, a far cry from the early days of my career when many of my friends' companies still hadn't installed email and did business over the phone.
It's taken many years for Mr Carr's vision to become a reality, but most corporations have now cottoned onto the fact that they shouldn't be paying too much for this basic stuff. IT may have become utility-like, but it differs in one particularly important way – unlike traditional utilities such as gas, electricity and water is that we can get IT from anywhere, and that's had a huge deflationary effect on its cost.
IT has become an industry without borders, where a delivery centre in Bangalore can deliver a service to a company at half the price of a local equivalent. The cost of computing has plummeted year after year after year, making life very difficult for large generic IT service providers who have seen their profitability eroded and faced competition from every direction - including telecom operators moving into IT services to offset commoditisation in their own markets. Meanwhile, the economic imperative to drive those costs down further still has never been stronger as economic troubles mount.
Mr Carr's argument has been criticised as an over-simplification of the role of IT in business, and that is still possible to eke out competitive advantage through clever use of IT. The proportion of IT budgets on these utility-like areas is expected to fall to less than a quarter next year, even though the overall volume of work has significantly increased.
So, while companies selling basic IT may find life increasingly difficult, companies that sell solutions that can help their customers generate genuine business uplift will still experience strong mid-term demand. 2009 may still be a tough year, as customers rein in capital budgets, but it could also create investment opportunities as valuations hit rock bottom.
