InformationWeek

New Priorities

Reengineering has lost its luster among technology execs, a CSC study reports

By Doug Bartholomew and Bruce Caldwell
Issue date: March 20, 1995

The reengineering frenzy that's been sweeping corporate America for years appears to be slowing down. A survey of chief information officers to be published this month by Computer Sciences Corp. (CSC) shows reengineering dropped 17%, from first to fourth place among the top information systems issues. The study marks the first time since 1990 that reengineering is not among the top two priorities in the well-regarded annual poll.

"The honeymoon period with reengineering is over," confirms Philip Stanley, director of business systems planning at the Bank of Boston. Reengineering has passed through the discovery and enthusiasm stages, he says, to a point of maturity where its difficulties are understood. Reengineering is still a priority, Stanley adds, but aligning IS with business should always come first. "It's a continual process," Stanley says, "especially in an environment where business itself is changing rapidly."

Two Views
A year ago, McKesson Water Products Co.'s reengineering effort helped the $250 million bottled water distributor cut $7 million in fixed costs and reduced its accounting department by 150 people. But did it helps sales? "We've redesigned the major processes, but now we're focusing on understanding our customer requirements," says Buzz Adams, chief financial officer and the champion of McKesson's reengineerin g effort. "Reengineering, we've found, is not an end in itself. The key is to grow the business."

Light bulb manufacturer Osram Sylvania has made reengineering a responsibility of its business units. "Aligning IS with business objectives is our Number One goal now," says Mark Penrose, director of information technology at the Danvers, Mass., company. "Reengineering is still taking place, but it's not the driving force."

Adams and Penrose are not alone; judging from the findings in CSC's eighth annual survey, "Critical Issues of IS Management." CSC, in Cambridge, Mass., polled 603 CIOs at North American companies with more than $250 million in revenue, and found that the top priority for CIOs over the past five years--reengineering--has slipped several notches, yielding the top position to "aligning IS with corporate goals." Last year, reengineering was the top priority for 69% of CIOs, while this year it dropped to fourth place at 52%. The change seems to be less a setback for reengineering than an ac knowledgement that reengineering accomplished most of its objectives and other priorities are now emerging.

But critics say reengineering has indeed lost some of its steam. One problem: The perception that reengineering is little more than another flavor-of-the-month project from top management. "It is the current buzzword," says George Sekely, president of the technology unit at CSX Corp., the $9 billion transportation conglomerate in Jacksonville, Fla.

Adds Stan Johnson, CIO at the Port of Los Angeles: "People get tired of reengineering because they never get to the end of their project before the company starts moving onto another goal."

Companies are moving into the systems-building phase of reengineering, concludes James Saviano, chairman of CSC's consulting and systems integration unit in Waltham, Mass. "Other activities, such as cross-functional systems and organizing and utilizing data, enable reengineering to get done," says James Champy, a best-selling author credited with launching the r eengineering craze. CSC chairman Champy co-authored Re-engineering The Corporation with Michael Hammer and has just published Reengineering Management .

Still, the fact that some highly publicized reengineering projects have fallen flat hasn't helped. Among those getting the most attention were fumbled efforts by Citibank, Amoco, and American Express. Citibank admits it wasted $50 million in a year-long effort to reengineer securities processing. Amoco stumbled twice, in 1986 and 1990, at reengineering its capital-budget allocation process, but finally got it right on the third try in 1992. And American Express saw its 1992 reengineering plans get hung up in protracted discussions over where reengineering fit in with the company's already entrenched total-quality management effort.

Blame To Go Around
"There have been some bad experiences with reengineering, much of those traced to the notion that you can blow everything up and start from scratch," says Tom Davenport, f ormerly with Ernst &Young and now professor of information systems at the University of Texas at Austin. Doing something that dramatic, he adds, "is not cheaper and easier, and people found that out the hard way."

What's worse, from the CIO's standpoint, is that IS often was the scapegoat. "IS people have borne the brunt of these experiences," Davenport says. "Companies found they could redesign their business processes on paper in two months, but that it would take two years to build information systems to support those changes. That was not popular with management." The result, he says, "was many IS people felt burned by reengineering."

"Cutting costs and removing non-value from your processes doesn't add to your ability to differentiate your company in the market," says Adams of McKesson Water. "We're trying to develop a better definition of our customer requirements to drive change in the future."

That's something business reengineering, with its emphasis on improving processes and effici encies, isn't likely to deliver.