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).
Pieter Wisse
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.
References
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