MIT Sloan Management Review

Management of Information Systems, Operations Management and Research

 

Do You Have Too Much IT?

By Andrew McAfee

April 15, 2004

The success of a Spanish clothing retailer shows that when it comes to IT spending, less is often more.

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In the late 1990s, companies often bought huge quantities of IT for reasons that had nothing to do with their business models or long-term strategies. In a common scenario, a company saw that its rivals had bought ERP or CRM applications, say, or had signed on to participate in a B2B exchange, and felt compelled to do the same. This fear of being left behind was reinforced by many constituencies, including software and hardware vendors, consultants, technology analysts, pundits, and the large, loud and growing e-business press. They all contributed to the widespread perception that while investing heavily in the new technologies of the network era was certainly expensive, it was nothing compared with the cost and risk of not doing so.

This follow-the-pack approach resulted in lots of IT overspending — Morgan Stanley, for example, estimates that between 2000 and 2002, companies threw away $130 billion of the IT they’d purchased. But what’s the alternative to such fear-induced spending? After all, new applications can, in the right circumstances, have a major impact on company performance, and no manager wants to be known as the one who blew it by moving too slowly on the new new thing. For those seeking to break out of a herdlike mentality, however, an example of wise IT investment comes from an unlikely source: Inditex Group, a clothing manufacturer... To read the complete article, login or sign-up using the form below.

 
 

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