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EXECUTIVE INSIGHTS Does IT Matter in Europe? Frank Gens

IDC OPINION At IDC's European IT Forum, held this month in Paris, author Nicholas Carr ("IT Doesn't Matter," Harvard Business Review, May 1, 2003) once again asserted that expanding commoditization is making IT a poor tool for building competitive business advantage. But a new IDC survey of European companies demonstrates that business leaders in Europe hold the opposite view. IDC's European Line of Business Executive Survey (European LOB Executive Survey) reveals that: ! An overwhelming majority of European executives see IT as important or critically important to the success of their business. ! A large percentage of these executives want their companies to use IT more aggressively in support of their business strategies. These executives outnumber those who'd prefer to use IT less aggressively by a ratio of more than 25:1. ! European businesses have historically been more conservative in their attitudes about IT than their U.S. counterparts. Yet this survey suggests that European and U.S. business executives share a similar "bullish" attitude about the present and future role of IT in support of business strategy and competitive advantage.

In February's Executive Insights, Business Executives: IT Matters a Lot (IDC #30886, February 2004), we showed that U.S. LOB executives strongly believe that IT is a key element supporting their current and future business success. Preliminary results from this month's IDC survey of European business executives shows the thinking in Europe to be quite similar. This is good news for the IT industry. But it also challenges IT suppliers competing in Europe to make their offerings and marketing messages more relevant to the LOB community and its business-oriented agenda.

IT Is an Important Ingredient for Business Success in Europe In September, IDC's European Vertical Research team surveyed 197 European LOB executives regarding their opinions about the role of IT. The survey directly probed the issue of whether LOB executives think IT matters to their business success, asking, "How much of a factor is IT operations performance in the success of your business?" Forty-six percent of the executives said that IT is "critically important," meaning that their business cannot actually operate without IT systems up and running (see Figure 1).

Filing Information: September 2004, IDC #31999 Executive Telebriefings: Executive Insights

FIGURE 1 Strategic Value of IT to European Businesses Q.

How much of a factor is IT operations performance in the success of your business?

Minor factor (4.8%)

Critically important factor (45.7%) Important factor (49.5%)

n = 187 Note: Data is preliminary. Source: IDC's European LOB Executive Survey, September 2004

Another 49% of respondents characterized IT as an "important factor," meaning IT operations have a major impact on their business performance. Only 5% said that IT is a "minor factor," meaning that IT operations have a small impact on their business performance. European executives' views were very similar to those of their U.S. counterparts. In a February IDC survey, 46% of U.S. LOB executives characterized IT as "critically important," with 40% describing IT as "important." This is obviously very strong evidence that the business executives who directly and indirectly fund European companies' IT investments consider IT to be a very important part of their ability to put their competitive strategies into action.

European Executives Want Their Companies to Be More Aggressive in Leveraging IT One could argue that, yes, IT may be an essential part of business operations in most companies today. But does that really mean IT is a truly strategic element for European companies? After all, one could argue that water and electricity are also "critically important" for businesses to operate, but no one would argue they are strategic, in the sense that they offer competitive advantages for companies that use them (or use them better than competitors).

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In fact, Nicholas Carr made this very point at IDC's recent European IT Forum in Paris. He argued that IT has indeed become part of the critical infrastructure of most businesses today (much like water and electricity) but that IT (like basic utilities) is a poor tool for building competitive advantage. His argument concludes that businesses, therefore, should not seek to aggressively leverage IT to build competitive differentiation but should take a conservative approach toward IT usage. In the European LOB Executive Survey we put this assertion to the test, asking LOB executives whether they felt their companies should be less (or more) aggressive in their use of IT to support their business strategies. The results (see Figure 2) show that European business executives couldn't disagree more with Carr about the value of IT as a tool to support competitive advantage. Less than 2% of the executives reported feeling their companies should be less aggressive in their use of IT to support the business, whereas nearly 42% replied that their companies need to be more aggressive in leveraging IT. Put another way, executives who feel their companies can further leverage IT for business advantage outnumber those who support the less aggressive position by ratio of over 25:1. This result compares with 55% of U.S. LOB executives who reported feeling their companies should be more aggressive in their use of IT — reflecting, perhaps, a traditionally more conservative attitude about IT in European businesses. However, both U.S. and European findings display a bullishness about the importance of IT to the business.

FIGURE 2 Desire to Use IT More Aggressively in Support of European Businesses Q.

Considering your business strategy, should your company use technology …

Less aggressively (1.5%)

More aggressively (41.5%) Same as today (57.0%)

n = 187 Note: Data is preliminary. Source: IDC's European LOB Executive Survey, September 2004

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In a panel discussion at the European IT Forum, I shared these findings with Carr and asked why so many European (and U.S.) executives feel their companies should use IT more aggressively if — as he argues — IT holds little or no value in building sustainable competitive advantage. His response was that often people are slow to catch on to new realities. In other words, he suggests that many business executives don't yet "get it" and are clinging to outdated ideas of IT's power to support strategic business change. Frankly, I doubt that. In 20 years of observing and helping companies leverage IT, I have yet to see many business executives get all starry eyed about the power of IT. And in the wake of the Internet hype-and-bust cycle, business executives are certainly as unromantic about IT as I've ever seen them. The more likely explanation for Figure 2 is that these executives have seen real success (along with some failures, of course) within their own and competitors' businesses in using IT to improve business processes and develop innovative business strategies. A last point: This is good news for the IT industry in Europe. But it also challenges IT suppliers competing in Europe to make their offerings and marketing messages more relevant to the LOB community and its business-oriented agenda. Indeed, we're already seeing many IT suppliers in Europe and the United States — even those with offerings deep in the IT infrastructure — reassess their offerings, their organizations, and their go-to-market structures and messages to do just that. And we expect their 2005 agendas to have a large focus on raising their levels of business relevance — a challenging, but essential effort.

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