InformationWeek

October 13, 1997

Survey Results: Look At The Long Term

IT must become a corporate resource, not just a way of accomplishing individual tasks, say CIOs

hen it comes to investing in technology, attitude counts. IT must be considered an overall corporate resource, not simply a means to perform specific tasks, concludes a Deloitte & Touche study that included a poll of nearly 500 CIOs.

"IT should be a strategic business resource, not just a glorified order-taker or repair shop," says Charles Nunamaker, a Deloitte & Touche senior partner. "This means IT must think and act the part by moving beyond the day-to-day. CIOs must link information concerning a company's performance to its overall business strategy. They must think beyond today's hot thing and make decisions whose impact will be felt-or cursed-for years to come."

This approach is reflected in the mix of technologies the 488 survey respondents identified as most promising over the next two years.

LAN technology continues to hold the most promise, say more than 80% of the respondents. Other highly rated technologies are those that facilitate access to and sharing of information, such as data warehousing, intranets, and image management and document-retrieval systems. Respondents indicated that more-specialized technologies, such as expert systems, handheld computers, multimedia, and voice recognition, are of lower importance over the next two years.

Respondents are cautious about the Internet. While security concerns are abating, CIOs are increasingly concerned about the cost and complexity of Internet-based initiatives, and about the lack of proven business benefit. They also place higher priority on other internal projects than on Internet initiatives.

The mix of mainframe, client-server, and custom-platform technologies has remained fairly constant over the past three years. The only significant shift has been a steady erosion in the share of budget devoted to mainframes and a corresponding increase in client-server investment. Yet while mainframe spending is declining as a percentage of overall spending, Deloitte & Touche finds it's likely that mainframes-indeed all legacy systems-will remain an integral part of enterprise systems.

Uncertainties about standards for emerging technologies and the future direction of business, along with concerns about the maturity of new technologies, work to preserve legacy systems as a vital part of the technology mix. The cost of replacing legacy systems has become much less of a concern for CIOs surveyed.

The report also shows that companies that are spending relatively little on IT and companies that are spending a lot employ nearly identical mixes of mainframe-based and client-server-based systems-but that spending per employee varies wildly.

In fact, average spending per employee on mainframe technologies, among the one-quarter of respondents who spent the least, was $359. But among the one-quarter of respondents who spent the most, average spending per employee was $3,458. Comparable discrepancies were found in the client-server category, where the average among the lowest spenders was $494 per employee, while high-spending companies averaged $4,408 per employee.

In terms of return on investment, high-spending companies average $253,000 in revenue per employee, while low-spending companies average $211,000. The mean revenue per employee among all companies surveyed is $219,000.

"High-spending companies do generate 20% more revenue per employee, but does that difference justify the 10 times more they spend on IT services?" Nunamaker asks. "Low-spending companies invest one-quarter what the high-spending companies do, yet low-spending companies have virtual ly the same revenue per employee as the average of all companies. If a company were able to realize, say, 10 times the value for each IT operating dollar, then why not spend more for technology? But the numbers show that simply isn't the case."

The differences between the high IT spenders and the low spenders isn't attributable to a generation gap among the CIOs, Deloitte & Touche finds. The average age of CIOs at low-spending companies is 45.3 vs. 46.9 at high spenders-virtually the same. Nor is tenure a factor; both low- and high-spending companies have CIOs who've been with them for 10 to 11 years.

"Companies shouldn't be seduced by the notion that there's a new breed of CIO who is younger and less entrenched in the company," Nunamaker says. "The differentiating factor is the degree of focus on business issues and how well IT is aligned with the business."

When it comes to spending, most CIOs are neither Santa Claus nor Scrooge, Nunamaker says. "CIOs are conscientious people thrust into an inc reasingly impossible job, as proven by the typically short five-year tenure the survey found," he says. Until the day they move on, Nunamaker adds, many CIOs despair of ever getting their organizations to think or spend strategically.

View the survey results as a PDF file.

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