IT Human Capital as Competitive Advantage

This is an excerpt of a paper I’ve just completed titled “Information Technology Human Capital as Competitive Advantage”. I’ve provided a brief intro plus the conclusion here. This white paper was the inspiration for the the topics discussed in my previous posts titled “Resource Diversity & Immobility Simplified“, “Competitive Advantage and the Resource Based View of the Firm“, and “Competitive Advantage – The Human Capital approach”

To read the entire article, download the PDF titled “Information Technology Human Capital as Competitive Advantage“.

This paper provides a brief review of the literature within the space of information technology and business alignment, and more specifically, the areas of creating competitive advantage by managing human capital to create a sustainable advantage in the marketplace.

In today’s ever-changing world, organizations must learn to evolve, adapt and continuously rethink their strategic objectives and operational abilities. As part of this strategic planning process, organizations have historically looked at two aspects; strategy (how they will go to market, what they will sell, etc) and execution (how to implement the strategy, how to do business, etc). The seminal research on strategy and competitive advantage (Andrews, 1986; Porter, 1998a, 1998b) historically overlooked two of the most important aspects of any strategy; technology and people.

In the 1990’s, researchers and practitioners began looking at merging technology into the strategic planning process and how the alignment of business strategy with information technology can help to create a competitive advantage (Henderson & Venkatraman, 1993). These researchers had brought technology into the strategic planning process, and in some respects they considered the human resources of the organization, but they still overlooked the people as being a valuable piece of capital that could be used to create competitive advantage.

This oversight is most visible within the information technology (IT) groups. Even though many organizations and researches stressed the need for IT and business alignment, they still seemed to overlook the human capital aspect while aligning IT and business strategy.

These oversights have led to the current environment of overworked, disengaged and misaligned IT personnel and IT groups. The “turnover culture” that has arisen within the IT industry provides some evidence of the unhappiness and/or discontent that most IT personnel have (Moore & Burke, 2002).

Recent research has provided a path to the solution of the problem of creating sustainable alignment between IT and business strategy. These solutions involve not only aligning IT and strategy but also implementing human capital management practices to ensure that people are considered as much of a resource for creating competitive advantage as any other asset within the organization (Hu & Huang, 2006; Robert, Agarwal, & Ferratt, 2000).

This paper provides a review of existing literature related to the strategic alignment of business and information technology and human capital management practices. The first section, titled “Alignment of IT with Business Strategy” provides a review of existing business and IT alignment research. The second section, titled “Human Capital Management, IT & Business Alignment” provides an overview of existing research into human capital management practices within the IT space.

The third section, titled “Human Capital as Competitive Advantage” outlines the use human capital as a means to gain competitive advantage in the marketplace. Lastly, the fourth and final section titled “Future Research and Conclusions,” outlines areas that may provide avenues of further research and concludes the paper.

To read the entire paper, download the PDF titled “Information Technology Human Capital as Competitive Advantage“.

Further Research and Conclusion

Further research into this area can follow Ferratt et al.’s (2005) study of the effects of human resource management on information technology (IT) employee turnover (Ferratt et al., 2005) and Joseph et al.’s (2007) suggestion that adopting a human capital management approach to managing IS employees may increase employee engagement and reduce turnover and job dissatisfaction (Joseph et al., 2007).

Another area of further research that could be considered is Huang and Hu’s (2007) approach of combining human capital management along with a business-IT alignment model by using a balanced scorecard system to implement and measure alignment. This balanced scorecard approach seems reasonable but very little quantitative data exists to measure the success or failure of this approach (Huang & Hu, 2007). Further research into the use of balanced scorecards to align IT, business and human capital management practices could be accomplished by collecting quantitative data in multiple organizations to provide more insight into the success and/or failure of this approach.

Yet another avenue for further research is within the area of validation of alignment of IT system requirements with business strategy (Bleistein, Cox, & Verner, 2005). Bleisten et al.’s research provides a framework for measuring and ensuring that all IT system requirements are in alignment with business goals. This research is interesting but as yet unproven.

Lastly, research into furthering the application of the resource based view of firms and the creation of resource diversity and resource immobility within organizations seems to be a fairly wide open area. In many organizations today, outsourcing work has become the norm as has hiring contractors instead of full-time employees. Many research questions arise from this. A few examples are:

• How can an organization create resource diversity and/or resource immobility when they are drawing from the same talent pool of outsourcers and independent contractors as their competitors? This is an idea that is very interesting and something worth pursuing.
• How can an organization segregate IT projects so that non-strategic projects (is there such as thing?) are managed with non-strategic assets and resources while strategic IT projects are managed with strategic assets and resources.

There is still considerable research to be done to better understand how to create sustainable advantage using technology and people. The areas of information systems, strategic human resource management and organizational behavior can provide models to help create sustainable advantage and value for organizations.

In order to truly create sustainable competitive advantage, an organization must have the right strategy, technology and people in place. In today’s world, it isn’t enough to have only one or two of these; an organization must obtain and maintain the mix of the right strategy, the right technology and the right people.