Finishing Off IT

In the Spring 2005 issue of the MIT Sloan Management Review, Nicholas Carr suggested in his article “The End of Corporate Computing” that the commoditization of information technology would signal the end of corporation-owned and operated IT in favor of a centralized set of utility-style providers. While Carr was correct that IT has, indeed, become a commodity, his prediction that IT operations would migrate away from corporate control to outsourcers may not be coming true. In fact, in the short time since Carr wrote the article, there is evidence that companies are choosing to return control of certain essential functions to their own IT departments.

The reason for this lies in a fuller understanding of what it means for a resource to be a commodity. IT, like many other commodities, is governed by the resource dependency theory: When a resource becomes so ubiquitous that it becomes essential to survival, the risks imposed by its absence outweigh the burdens of maintaining its availability. This is the case with many aspects of corporate computing. IT processes are fully integrated in nearly all business practices, from simple e-mails and data storage to more complicated core practices such as forecasting and audit procedures. IT has become so ubiquitous, in fact, that it is taking on another common attribute of commodities — the need for government oversight and regulation.

Other commodities, such as gas and electricity, have become so pervasive in the economy that it has become necessary to agree on a set of standards to govern their usage. There are regulations as to how these resources are created, who can create them and how to measure their usage, and penalties are created for abusing these standards. A similar situation is occurring with IT, for example, U.S. government regulations requiring 911 emergency service across broadband and digital phone providers. Moreover, IT has been so integrated into our culture that government regulations on business and government practices include IT components. For instance, Title 21 Code of Federal Regulations governs electronic records and signatures for all companies under the authority of the U.S. Food and Drug Administration. The Gramm-Leach-Bliley Act, also known as the Financial Modernization Act, requires financial institutions to establish administrative, technological and physical safeguards to ensure the confidentiality and integrity of customer records and information (electronic or otherwise).

It is precisely the problems of integration and regulation that have necessitated the return to corporate computing.