This is a shortened version of Strategic moment(um) for infrastructure: on shifting the balance of IT governance, which in its turn has been translated from the Dutch-language Strategische verschuiving door moment(um) van infrastructuur: de beurt aan informatietechnologie (in: PrimaVera, working paper 2006-01, Amsterdam University, 2006).




Infrastructure vs. Commodity

Pieter Wisse

Society cannot be reduced to business. Infrastructure is not the final stage of commoditization. Strategically, theres a dynamic balance between public and private IT governance.

The Harvard Business Review should be excused for its bias. Nicolas Carr certainly caused a stir declaring ITs strategic irrelevance. Strictly from a business perspective, moreover, I agree that IT Doesnt Matter. Carr is right, but for the wrong reasons. For it should be recognized that business firms operate in society.
A broader perspective suggests the distinction between commodity and infrastructure.
And how essential a distinction it turns out! At the scale of society, government can even be considered as primarily implemented by infrastructure. So, infrastructure is always the expression of a political order. In a democracy, government especially applies infrastructure for securing equality, precisely because a free market resulting in commodities would not succeed.
Information technology is no exception. Indeed, the individual firm can now relax on its strategic effort as far as IT resources are concerned. Why? Not as a result of commoditization, but because government now takes on the strategic burden. At that point only, the political concept of infrastructure starts where the economical concept of commodity ends.

Public Duty Once the infrastructural potential of a particular technology and of course we are now witnessing such a development for IT gets recognized, government reports for public duty. Government is actively involved, in varying capacities, in the whole life-cycle of infrastructure. Democratic governments objective is elimination of some factor which is considered to favor unfair competition. Please note, what business firms engage in is only a subclass of competition. Government selectively infrastructuralizes for promoting the quality of the society as a whole. For example, government also promotes equal opportunities in education. The argument systematically goes I dont say here that it always works out! that what benefits society, must needs benefit its members, vice versa.
It should be clear, then, that currently ITs strategic relevance is in fact paramount for government.

Essence of Infrastructure With an inverse proportionality at work, a strategic shift occurs from business economy to politics. ITs diminishing strategic relevance for the single firm is grounded to a large extent on government acting strategically by incorporating IT as infrastructure.
Discretionary space changes for the individual when something acquires the status of infrastructure. As a consequence, for some aspects of individual behavior opportunities for variation decrease, or are eliminated altogether. Rather than an inconvenience or disadvantage, such variety reduction is really what infrastructure should help accomplish. By definition of infrastructure, any actor, be it a citizen, a firm, or whatever, cannot make distinctively individual decisions and/or perform divergent actions. Something just wouldnt be infrastructure if he still could.
Then, what use is infrastructure? Constraints for certain aspects/respects should extend the powers of discretion as measured by other aspects. For instance, take a public road between A-town and B-town. Its public, so everybody can use it. Indeed, there is a demand for road behavior tending to uniformity, i.e. behavioral constraints apply such as keeping to a particular side of the road while moving, etcetera. But of course thats not all there is to the public road. More people can now access B-town for more of their particular purposes. As a bottom line, everybody from A-town stands to gain through enlarged strategic potential. In the other direction, the same goes for all inhabitants of B-town.
This macro-perspective may differ from individual micro-perspectives. Particular variety rules for the single firm, or for anyone operating as a social actor (also read: stakeholder). Depending on his prospects, power position(s), etcetera, the actor in question can exert some influence. Such actors dynamics establish infrastructure as resulting from politics. For theres politics at stake whenever there are multiple stakes. Then, it is a matter of public choice. (A) democracy is all about rules for politics as process. Government is the process executive for its allotted period.

Infrastructure as Social Contract A preoccupation with the private business sector may lead to the idea that infrastructure is the inevitable, direct result of a process of commoditization. In hindsight, any infrastructure may of course be seen as having originated somewhere and subsequently developed from there. When the invisible hand has molded a particular resource, be it a product or a service, into a veritable commodity, for example Carr feels justified to define it as infrastructure.
I propose a different model for infrastructural development. Infrastructure and commodity are better kept clearly differentiated. It is not that I dont recognize that some personal or companys property can eventually develop into infrastructure. However, it never just develops that way; commoditization is far from enough.
What really happens, is that infrastructure only exists as such from a certain stage of development onwards. A defining characteristic of infrastructure is that is does not exist before, that is, not as infrastructure. To be sure, something can be a commodity before that stage. Then again, when something truly is a commodity, why would government intervene in the first place with infrastructural development?
Characteristic for infrastructure is also what happens after its constitution. For of course infrastructure is subject to change, too. What is different about such change, is that it no longer occurs naturally. On the contrary, infrastructure implies institutionalization. As its irreducible aspect, an institution controls infrastructure, including its further development (also read: life cycle). In other words, the users of infrastructure are subject to a social contract.

Infrastructure is Governments Core Business Lets consider what government actually does. Besides several other topics, governments main tasks are outlined in a states Constitution. First and foremost in a democracy, government promotes equal rights, everywhere given the practical turn of promoting equal conditions. This explains governments compulsion for infrastructure.
Governments encompassing care of conditions for equality positions accurately why infrastructure does not result from commoditization. A democracy takes a particular theme for a subject of government care as soon as it becomes clear that continued absence of regulation is disadvantageous for conditions for equality. In other words, the risk, evidence, etcetera, of inequality are what move the government to take action. So, infrastructure as-equality-of-conditions originates from inequality.
From a particular moment on, government guarantees the conditional equality; by definition, infrastructure is invested with formal authority. And a resource that really is a commodity, can just remain commodity. Why bother?
The moment for genuine infrastructure has come when a particular resource, or set of resources, is on the one hand recognized as a necessary condition for equality, but on the other hand will not achieve the status of a commodity. A true commodity is by definition a standard de facto. Through infrastructure, a standard de jure is established; government enforces equality.
Confusion lurks because a standard de jure usually originates from what seems the primary candidate for a standard de facto. However, thats just how is seems. In reality it is only when the standard de facto is beyond reach for a particular resource, that is, it will not be a true commodity, that it would be considered as a standard de jure, i.e. as infrastructure. Again, infrastructure is not the next stage in free-market commoditization. In a vital respect, it works precisely the other way around. It is because commoditization does not occur, why government intervenes.
Of course, government creates, promotes etc. markets with infrastructure. However, what an infrastructure essentially conditions, is removed from market competition (as such removal is the raison dtre of infrastructure).

From Infrastructure to Trust to Social Development Using business terminology, governments strategy should reflect its mission statement which in turn is supplied by the part of the Constitution that covers fundamental rights and duties. Reference to the Constitution serves to support the hypothesis that the practical purpose of government lies with development and management of social infrastructure. Assuming that there is government strategy, too, it therefore actually revolves around infrastructure. It is the key ingredient. The government focus on infrastructure is meant to establish trust. Firms and first of all citizens, of course must be able to trust using the infrastructure.

Strategic Shift Strategically, firm and government can now be seen at opposing ends. Adopting resources as infrastructure exhibits the strategic interest of government. From that moment on, government guarantees quality at a certain level, is liable for malfunction (with liability also limited in practice), etcetera. For example, the resource-as-infrastructure is continuously available and can be safely used.
How does this make an individual firm the governments strategic opposite? To the extent that the government really delivers according to its strategy, indeed, the individual firm can relax strategic attention. From the perspective of the firm, infrastructure is outsourcing at a more or less guaranteed service level.
Through its strategic orientation at infrastructure, government actually issues a warrant. A mere commodity doesnt offer that security. As long as the distinction between commodity and infrastructure remains obscure, the strategic shift also goes unnoticed. When a resource is just a commodity, the security that only infrastructure can provide is lacking. Managing its risks, when applying commodities the individual firm still needs to take precautions on its own initiative, thereby unilaterally increasing so-called transaction costs.
Infrastructure, in fact, leaves the individual citizen and firm without a choice as far as risk management is concerned. For the resources in question are subsequently organized under government control. The effect for an individual firm is of course that even less space results to maneuver strategically for the aspects involved than it would have when such resources would only be commodities. Is that a problem?

Freedom in the Balance Governments mission is realized when on balance the firm and the citizen, of course is freed to develop aspects that hold greater value for both the individual and society as a whole.
Over time, there are cycles. Equal conditions enable a particular firm to develop, with less effort than would otherwise be required, something that subsequently stands out. It differentiates itself. But what starts out as a difference may become classified as the next condition for equality, and so on toward new infrastructure.
ITs strategic relevance far from disappears. Again, it shifts. The very nature of government dictates that nothing is more strategic than social infrastructure. And it now is ITs turn, as it/IT is increasingly recognized as requiring infrastructural status. The strategic center of gravity therefore shifts to government. It is the strategic role of government to create equal conditions for social actors such as citizens and firms. After resources become infrastructure, the strategic interest of government is inversely proportional to that required from individual actors. IT is really no exception.




1. N.G. Carr, IT Doesnt Matter, Harvard Business Review, May 2003.
2. N.G. Carr, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage, Harvard Business School Press, 2004.
3. Constitution of the Kingdom of the Netherlands 2002.



January 2006, web edition 2006 Pieter Wisse