Two Views On How IT Can Be Better Managed

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Information technology (IT) doesn't matter-at least in the ways credit union management typically views and uses it, according to two experts.

The Credit Union Executives Society's annual convention here billed the back-to-back general sessions by author Nicholas Carr and consultant Steve Williams, principal of Scottsdale, Ariz.-based technology consultancy Cornerstone Advisors as a debate of sorts. Instead, the pair found a lot of common ground.

Carr, the former editor of the Harvard Business Review, caused a stir in technology circles last year with his book "Does IT Matter?" Carr argues IT has been commoditized, thereby diminishing its advantages. He acknowledged to the audience made up primarily of directors that IT is ubiquitous and integral to modern business processes to the point it is necessary for survival, and it can, in the right circumstances, boost productivity. But still, he questions: is IT essential to business strategy?

"Can we use IT innovations to gain a competitive advantage over our rivals?" he asked. "Are those advantages sustainable? The answer is (that) productivity gains are shared by all competitors."

According to Carr, there are two types of technology: proprietary and infrastructural. The former can be owned by a single company, either through patents, exclusive licenses or secrets. The latter type is shared broadly by all firms in an industry or region, such as rail, telegraph, telephone or electricity.

"Technology is much more valuable when it is broadly shared and it becomes part of the business infrastructure," he declared.

As software increasingly is shared and more businesses turn to specialized companies-a practice Carr referred to as "vendorization"-homogenization, standardization and commoditization occurs. This, in turn, brings a vanishing advantage for formerly distinctive systems.

The next step will be a transformation from technology as a complex, separate entity to something no more mysterious than flipping a switch and having the lights come on. IT doesn't matter, IT management does, he said.

Common Ground

Williams began his talk by lauding Carr. He said many people do not understand what Carr means when he says IT doesn't matter.

"Carr's speech was not a lecture on IT, it was a lecture on strategy," Williams said. "IT needs to be managed better, but it will impact us a lot. One of the reasons IT still matters is we've done a crummy job with it. We've spent millions of dollars, but we're not getting enough out of it."

To illustrate his point, Williams showed the crowd a slide of the oft-seen "Intel Inside" logo. Underneath was the legend: "Idiot Outside."

Pace of Change Continues

Credit unions have become "fast-followers," Williams said. This means they avoid the cutting edge. Yet, they still think of themselves as "strategic." "If you are a fast follower, you are not strategic," he asserted.

It would behoove CU management to keep an eye on the horizon, Williams continued. The oldest members of Generation Y-born in 1981 or later-just graduated college and are interviewing for jobs. In 10 to 15 years, they will be buying houses and becoming key members.

This next wave of tech-savvy potential members has helped drive a tremendous boom in new devices and delivery systems. More than 60% of Generation Y members who own a cell phone are using text messaging-significantly more than any other age group.

The worldwide Internet population is at 600 million; with 167 million in the United States. Broadband has made tremendous gains in recent years, and the U.S. now has more than 60-million high-speed Internet users.

Of particular interest to CUs, Williams said, is the rise of online banking that has accompanied the broadband explosion. "From a standing start seven years ago, there are now 53 million people and 30 million households who use Internet banking."

Some Commoditization, But...

While IT eventually might become a commodity, that time is not yet here, said Williams. It remains a big expense to be watched carefully. "Credit unions must keep managing IT strongly in order to keep costs down and create focused innovation," he said.

IT costs can be lowered by following a few simple rules. Williams recommends strict standards for technical "plumbing," meaning everyone in the CU has the same PC and uses the same type of server. Whenever possible, credit unions should manage desktops from a central location, check the market constantly for competitive prices, and, most importantly, don't allow "man behind the curtain syndrome" with their IT staffs.

"Americans talk about IT as though it is a separate thing," he said. "Take the mysticism out of IT, it is just another resource. The Japanese talk about business strategy, and IT is thought of as just one part of it."

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