Develop Long-Term Competitiveness through IT Assets

  • Jeanne W. Ross, Cynthia Mathis Beath and Dale L. Goodhue
  • October 15, 1996

Assessing the value of information technology (IT) has never been easy. Delayed benefits, unintended uses, business changes, and hidden support costs inhibit meaningful evaluation of individual IT investments. This was true when most investments were focused on the support of a single business process or functional area. It is even more true as business executives ponder implementations of shared technologies like data warehouses and networks, replacement of large legacy systems, and reskilling of the IT staff. Although firms introduce some systems to reduce costs and can evaluate them in terms of their success in doing so, they want many IT initiatives to support a firm’s strategic objectives. The value of these initiatives rests in their contribution to a firm’s competitiveness, which is often nonquantifiable and uncertain.

How can firms apply IT to enhance competitiveness? We believe the answer lies in the development of an especially effective IT capability: the ability to control IT-related costs, deliver systems when needed, and effect business objectives through IT implementations. This capability derives from careful management of three key IT assets: (1) a highly competent IT human resource, (2) a reusable technology base, and (3) a strong partnering relationship between IT and business management. The results of a two-year study of IT management practices suggest that the quality of these assets dictates the quality of IT planning, delivery, and support processes.1 And the quality of those processes influences a firm’s ability to deploy IT to meet strategic objectives. In this paper, we describe the three IT assets and their characteristics and explain how the assets are converted into business value. We then offer strategies for building IT assets in a firm.

IT and Competitive Advantage

In the early 1980s, high-profile information systems like American Airlines’ SABRE system and American Hospital Supply’s ASAP system suggested that IT applications offered the potential for competitive advantage.2 Over time, however, it became clear that competing firms could eventually copy most IT applications and that the competitive advantage from any particular application would be short-lived.3 Nevertheless, firms like Wal-Mart and Federal Express have demonstrated that the capability to apply IT to business opportunities (as opposed to any specific IT application) can indeed enhance competitiveness.4 The resource-based view of a firm argues that firms compete on the basis of their unique resources.