Managers Survey: Tech spending priorities for 2002

CIO surveys are required reading these days, as everyone tries to guess where technology budgets are headed. Companies are pulling back across the board. Security is top of mind. CRM, ERP, and supply chain projects have cooled somewhat, according to the latest rankings.

But behind these numbers and the top-level prognostications, what are key enterprise managers really thinking about technology spending in the near future? We decided to get down in the trenches with our own informal phone survey of corporate line managers. Rather than ask CIOs, we asked their customers--the people running the actual business units. We asked them to share their views of technology going forward, and what's tops on their technology shopping lists.

We expected to hear quite a bit about spending on security, but surprisingly we heard about customer-facing systems, core business issues such as getting easier access to key internal data, improving labor productivity to reduce costs, and making technology easier to implement.

A few of the managers were completely fed up with technology--large tech investments hadn't worked out well for their businesses, so they didn't plan to spend any more of their shrinking budgets on new technology now. Others took an opposite view, claiming technology was critical to their competitive position, and they planned to push full speed ahead with technology deployments, downturn or no.

But most of our survey respondents came down in the middle, saying they were pulling back on tech spending overall but making exceptions for key projects that touch customers or improve the bottom line quickly.

Retailer: "We're avoiding tech spending right now," said There I. Dupont, VP of Safety, Quality and Supply Chain for Wawa Inc., a $1 billion convenience store chain. "We have to give up on our best of breed technology strategy. What was marginal before is now not going to happen next year [2002]." As part of its newfound focus on only "need-to-have" tech projects, for example, the company is delaying a planned ERP implementation until 2003-4.

However, strategic systems that bring an immediate dollar benefit to the business are another story. A prototype touch-screen ordering system has been so successful in 30 Wawa stores that it's being rolled out ASAP to the company's other 500 stores. "Its got direct customer impact, so it gets higher priority" says Dupont of the system that lets customers order custom-made hoagies and deli items for faster pickup at the register. "It speeds up the customer's visit and increases our throughput, which is one of our key issues."

Brokerage firm: "Technology that drives productivity improvements will be prioritized over technology to grow revenue or build out new channels," a top manager at a 20,000-plus employee financial services firm told us. "Financial services is very paper intensive, anything that can reduce labor cost by automation, such as workflow and imaging systems, is good, especially if it lets you scale up or down with less pain." The company has just been through wrenching layoffs, and wants to use technology to better prepare the business to adapt to future fluctuations in trading volume.

Recreation company: "Our focus is [on] technologies that help revenue generation or systems that impact the guest experience" said Eric Resnick, CFO of KSL Recreation Corp., which manages a $2 billion portfolio of high-end resorts and golf courses. "We've always been pretty conservative, putting our tech dollars where the customer will see it." He points to a cross-resort customer database, online booking capability and in-resort Web access--three projects currently underway that the company expects to continue, as examples of this strategy.

Consumer products company: "We're continuing to invest pretty heavily in a major project to integrate all our information systems," said Rob Stravitz, Director of Marketing for the Home Care division of The Clorox Company. "We're not at the cutting edge, we can afford not to have the latest and greatest, but this project is not being put on hold--it's too critical to the long-term health of the business." The key benefits of the system will be easier, seamless access to information including customer orders and financial reporting, according to Stravitz.

Construction company: "We had been spending aggressively on information technology," said Leo Linbeck III, Chairman of Linbeck Construction Corp., a Texas company that has annual revenues of $300 million. "A year and a half ago, we sat up and realized we had gotten ahead of the training curve. The amount of time it was taking for our people to get up to speed on the new systems was slower than the innovation cycle." The result was a near moratorium on new technology spending at the company.

"What we realized was we were overspending on the technology, underspending on the people," says Linbeck. "Now we're only adding new systems to accommodate natural growth--like PCs. We're focusing on enabling people to use the technology." To the extent the company is buying new technologies, adds Linbeck, they tend to be plumbing, such as a VPN or broadband connection for a new construction site.

Global Bank: "Technology is fundamental to delivering on our strategy, to getting share of wallet," says a Senior VP at a large multinational bank with over $600 billion in assets. "We want to be one of the world's most admired companies, to handle your whole financial relationship," she says.

She rattled off a long list of technology projects that are moving ahead full steam toward achieving this goal--from "webifying" ATMs to data mining to imaging systems that let customers view their cancelled checks on demand.

Key drivers of tech spending for the company, she explained, include assuring availability of systems, know-the-customer initiatives, enabling sales, fulfillment and servicing, and even fighting money laundering. The bank is continuing to spend hundreds of millions of dollars to pull together its disparate legacy systems.

"We spent a lot of money for a long time putting systems together," she said, "but we still haven't done the middleware that pulls it all together from a customer perspective."

Shutting the tech spending spigot
Drug company: "We get so many great ideas that are technology based," said a marketing executive in a top-three global drug company. "But very few of them actually pan out. CRM makes a whole lot of sense for us, for example. It would be good for understanding our physician customers better. We're not leveraging our information across the whole organization right now, and we look uncoordinated to the end customer. But there's so much work in doing that right; we'd have to take people and really focus them on this, require tracking, inputting, documenting. Historically it's never worked. We've all been through it so many times."

This response seems to be an accurate reflection of the IT climate in healthcare. We found that healthcare firms felt little consumer pressure for better technology, and companies typically sell to the health plans that are primarily concerned with cost.

The bottom line
So what's the upshot of this data? It's easy to assume corporate America is monolithic and works in lockstep, particularly with regard to technology, but it isn't and doesn't. Security is on some peoples' minds, but not others. CRM is a big deal, but not the only deal.

There's an economic downturn happening, but companies still have ongoing business imperatives to integrate systems, better understand their customers, and use technology as a competitive weapon and to lower costs. The managers we spoke with were all focused on how to run their businesses better. That's why they buy technology, and that will be their focus when they open their wallets during the next 6 to 12 months.

The big change is a focus on the here and now instead of speculative technology investments to build new brands, new channels, or new paradigms. Technology isn't magical anymore, but it's still a crucial part of doing business.

David L. Margulius is a technology marketer and consultant based in San Francisco. He can be reached by e-mail at dmargulius@pacbell.net.

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