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Why Applications Don’t Matter

Nicholas Carr infamously penned “Why IT Doesn’t Matter” back in 2003, and many in the IT world howled their indignity at the idea. Many proved over and over that IT did matter in many businesses. IT did provide competitive advantage.

But part of what he stated does resonate now. Business applications used to be the epitome of how IT helped differentiate an enterprise. American Airlines invented the yield management system for allocating and pricing airline seats, revolutionizing the industry and generating an estimated $1.4 billion in additional revenues over three years. MCI won five points of market share from AT&T in the 1990s with its Friends and Family plan, enabled by its uniquely flexible billing application. Bank of America cemented customer relationships and leapfrogged competitors by providing state-of-the-art electronic bill pay capabilities.

But more and more, the custom or customized application is dying. Of course, there will always be custom applications, and some companies and industries such as Wall Street will remain highly dependent on them. But for many enterprises, the cost of maintenance and the inflexibility caused by decades of either building custom applications, or highly customizing packaged applications from vendors, has simply become too high to bear. Many organizations have laid down a new law: applications are to be purchased, and they are to be implemented vanilla— no customization. Several CIOs at a CIO conference I recently attended stated this as their go-forward strategy. If the applications are vanilla, they can no longer be the source of competitive differentiation.

So what in IT is now the source of competitive advantage? The data. The data transcends the application. The data outlives the applications. Data is more important than the applications. After all, the applications are the means to capture the data, but the data captures what is actually going on in the business.

IT organizations need to shift their priorities to recognize this reality and to focus on their data infrastructures. We’re already seeing signs that this is happening. Historically, the applications folks tended to be at the top of the totem pole in the IT organization. But more and more IT executives are putting their key managers on data integration and data management. Some are even anointing data czars or chief data officers. In fact, at the conference, the CIO of an insurance company asked me for leads in recruiting a data czar, a position he was about to create. (If anyone wants the job of data czar in the Philadelphia area, let me know.) The CIO needed someone to think about data and information strategically across the entire enterprise, while his existing IT leadership kept the shop running smoothly.

Applications are still a core foundation to any business. But like email and networking, they are becoming commoditized. The key to competitive differentiation is in your data and how you integrate and manage it.

Next posting: Why you should throw out your ROI analyses.

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