The Biggest And The Best

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By Bob Violino
Issue date: Sept. 9, 1996
s the Internet still more hype than substance? Not if you ask the nation's largest corporate users of information technology. They say the Net is real--and they mean today.
In fact, a leap into cyberspace is one of the major trends tracked in this year's InformationWeek 500, the eighth annual ranking of the biggest and best users of IT.
Also at tracting the attention of CIOs are intranets--internal networks with search engines, browsers, and other Net-like features. IS chiefs are also turning to data mining, high-end client-server applications, and other IT resources to help boost their organizations' productivity.
To rank the biggest users of IT in the United States, InformationWeek has once again teamed with Computer Intelligence (CI), a La Jolla, Calif., research firm. Our rankings are based on a formula that takes into account the amount, type, and use of IT by organizations ( see story , p. 46).
We also selected the best users of technology in each of 20 industry sectors. This list was drawn up with the help of researchers at MIT's Sloan School of Management ( see story , p. 48).
The IS budget and employee totals listed in the IW 500 and industry charts were compiled from a survey by Advantage Business Research Inc. in Lake Success, N.Y. The survey also asked C IOs about their companies' involvement with outsourcing, reengineering, and client-server computing.
For companies that didn't respond, InformationWeek estimated their IS budgets based on an average of revenue and IS budgets from responding companies in the same industry sector. The estimates were then weighted for each company according to its reported revenue. The IS employee estimates are based on an average of IS employees from responding companies in the same sector, weighted according to reported revenue.
Racing To The Net
As in past years, the 1996 IW 500 profiles a broad range of industry sectors, each with unique IT requirements, challenges, and solutions. To determine the role IT plays in each industry, InformationWeek reporters interviewed the CIOs who make the critical decisions that set companies' IT strategies in motion.
Among our findings: The Internet has moved from being a curiosity to being a technology asset. In fact, if you're reading this issue of the IW 500 online, try doing a quick search of "Internet." You'll find numerous references to the Net in many of the industry profiles. And if you're reading the print version, flip through the pages: You'll see that nearly every "Trends" box featured with each profile includes initiatives related to the Internet.
A year ago, we found unbridled enthusiasm about the Net among many corporations. But in most cases, those talking were Webmasters and other online gurus. This year, CIOs are taking the Net more seriously as a business tool.
"The Internet has allowed us to disseminate much more information to a wide number of our constituents: employees, customers, suppliers, and others," says Jim Sutter, VP and CIO at Rockwell International Corp., the Seal Beach, Calif., aerospace firm.
Sutter says he especially appreciates the fact that the Internethas "real" standards. "When vendors first came out with client-server applications, they promised all kinds of interoperability. But it didn't ha ppen, and that led to a lot of disappointment," he says. "With the Internet, the standards are such that things really work."
Ongoing concerns about information security have kept many companies from using the Net to conduct online commerce. But organizations continue looking to the Internet and other online resources for a variety of business applications.
"There's a lot more experimentation going on with things like transaction processing," says Ray Caron, senior VP and CIO at Cigna Corp., the Philadelphia insurer.
At the same time, Rockwell's Sutter notes, CIOs should be wary. Much hype still surrounds the Net, particularly as a way to sell products. "The things you read in the general press can lead management to believe that their competitors are doing a lot of electronic commerce on the Internet," Sutter says. "But the reality is, there's not a lot of that yet."
CIOs are doing more than talking about the Net. Members of the IW 500 are devoting an average of nearly 3% of their 1996 IS budgets to Internet and new-media initiatives. That may not seem like a lot. But the average IS budget in this year's survey is close to $200 million, so that 3% works out to about $6 million per organization.
Aggressive organizations report they're spending up to a quarter of their IS budgets on the Internet and new media. Some industries are moving faster than others. Financial services firms, on average, are spending 9% of their budgets; computer companies, more than 7%.
If anything's hotter than the Internet, it's intranets. Many companies in the IW 500 either have developed intranets or are building them."Intranets are revolutionizing business," says Rockwell's Sutter. "They've made E-mail more comprehensive by letting you include search engines and easily refer to databases with all the contents of an interest group."
Data mining, another hot technology, is letting banks and other companies use previously gathered customer data for the marketing of products and services. Once thou ght of as a tool to "mine" valuable data buried in old mainframe applications, data mining has evolved to be much more. "We're not only dealing with mainframe-based applications," says Mark Lutchen, CIO at professional services firm Price Waterhouse LLP in New York. "In today's IS environment, we also tap into the valuable information contained in 'new legacy' PCs, client-server, and other technologies."
Companies are paying for these new tools with growing IS budgets. Members of the IW 500, on average, plan to increase their budgets by about 13% over spending in 1995.
Many of those dollars are also going toward business reengineering efforts. CIOs in the IW 500 say that on average, slightly more than 17% of their IS budgets this year is dedicated to support for reengineering or business-process redesign projects. More than 46% of the CIOs say departments or business processes at their companies have undergone reengineering in the past five years.
Charging Ahead
The manuf acturing sector, by far the largest in the 500, is one of the busiest when it comes to reengineering. For example, Snap-On Inc., a Kenosha, Wis., maker of hardware tools, is redesigning business processes to improve deliveries to distributors and retailers. "We're replacing our whole infrastructure, including our entire applications portfolio," says Lawrence Panatera, Snap-On's VP and CIO.
The IW 500 CIOs also report a rise in outsourcing, at least in terms of percentage of IS budget. CIOs expect to devote nearly 13% of their 1996 IS budgets to outsourced services. That's up from less than 6% in 1991.
CIOs in nearly all industries share a common problem: the year 2000 issue. Millions of lines of legacy Cobol code, most running on mainframes, are at risk whenever the year 2000 is referenced in data or calculations.
"This issue will preoccupy us for the next several years," says Caron of Cigna. "I'd expect all large companies are aware of it and are making plans to be compliant. But I suspect a lot of midsized or smaller companies are not even aware of the risks."
That said, the CIOs of IW 500 companies say they're looking forward not to problems, but to opportunities. They're looking to the Internet, intranets, data warehousing, and other IT resources to help them provide more support to business than ever before.
Go to the InformationWeek 500 industry stories or Go to the InformationWeek 500 charts in PDF format
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