InformationWeek
Defining The Business Value Of Technology
September 27, 1999
InformationWeek500Industries At A Glance
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By Bob Violino
he use of technology varies wildly from one industry to another. Some businesses jump into E-commerce ventures, while others are more cautious. Some place a high priority on customer-related systems and services; others don't. And some spend lavishly on IT while others are more frugal.
Where does your industry fit in? The charts on the following pages give comparisons of the 20 industries profiled in the InformationWeek 500 in a variety of areas.
Electronic business is on the rise in many industries, as companies expand online ventures and set up electronic supply chains through intranet and extranet portals. It's no surprise, then, that the companies helping to make E-business possible are themselves leading the way in this trend. Every company in the IT industry that appears on the InformationWeek 500 list already provides some form of customer service on the Web. The next highest percentage of companies providing customer service on the Web comes from the pharmaceuticals industry, at 92%. At the other end of the spectrum, 47% of food and beverage companies support their customers via the Web.
Though most IT companies also sell products on the Web, telecommunications companies are most active here, with 92% reporting they sell products on the Internet. Food and beverage companies ranked low here, as did health-care companies. Telecommunications companies also lead the way in selling services on the Web, with participation rates double the average of 47% for the entire InformationWeek 500.
The average portion of customer-service inquiries handled electronically and automatically among the InformationWeek 500 is a relatively low 15%. But banks and financial-service providers take care of nearly half their inquiries this way, and IT companies handle more than one-third electronically.
InformationWeek 500 companies on average include nearly one-fourth of their customers and about 30% of their suppliers on electronic supply or value chains. Pharmaceuticals companies have the highest proportion of customers on electronic chains, and retailers have the highest percentage of suppliers.
All of this "E" activity produces electronic sales that account for a sizable portion of total company revenue. Pharmaceuticals companies say they garner more than half of all revenue from E-business, easily the highest percentage of any industry and more than twice the average for the InformationWeek 500.
Innovative users of IT say another high priority is to provide their "knowledge" workers with business-intelligence tools, such as data mining, to access data stored on large servers and mainframe data warehouses. Media companies rated highest here, providing on average more than one-third of workers with these tools. The InformationWeek 500 companies as a whole capture a little less than one-third of their knowledge assets and intellectual property data using their current knowledge-management procedures. Hospitality and travel companies lead the way with 45%.
As a group, the InformationWeek 500 is devoting more dollars to technology. The median IT budget as a percentage of projected revenue this year is 3.6%, up from 3.4% in 1998.
The banking and financial-services industry spends the most by far of any sector, with IT dollars amounting to a whopping 9% of total business revenue. That spending level remains unchanged from last year, however. Others who pour large amounts into IT include professional services firms, whose IT spending as a percentage of revenue jumped to 7% this year from 4.5% in 1998, and telecommunications companies, at 6%.
Food and beverage processors, hospitality and travel companies, and metals and natural resources companies are at the bottom of the spending list. Companies in those industries devote, on average, 2% or less of revenue to their IT budgets.
CIOs worry constantly about attracting and retaining IT staffers, and the biggest portion of the IT budget goes to salaries and benefits. Construction and engineering companies devote the largest share to this; at 39%, it's well above the InformationWeek 500 average of 30%. Transportation companies devote the smallest share, just 23%. The reverse is true for the share of budget allocated for development of new products and technology. Transportation companies devote the greatest share, 17%, and construction and engineering the least, 9%.
Transportation companies devote a larger share of their IT budgets to services and outsourcing than any other industry, a huge 20% slice of the pie. Construction and engineering firms devote the least, 6%.
With the emergence of E-business as a major strategy, it makes sense that companies overall are devoting more of their IT spending to such electronic efforts. But it's curious that companies in the construction and engineering industry earmark the largest percentage of their IT budget for this endeavor, higher even than financial services, IT, and retail companies.
Customer service and relationships are hot topics for CIOs, so for the first time this year InformationWeek asked companies to break out their spending on customer-management systems. Utilities, which in many cases are facing newly deregulated and more competitive markets, and pharmaceutical companies devote the biggest budget share to customer efforts.
Reflecting the near-completion of year 2000 renovation projects, InformationWeek 500 companies are devoting a smaller portion of their budgets to Y2K this year than last. Still, companies in electronics, health care, metals and natural resources, and media and entertainment allot double-digit percentages of their IT budgets to Y2K. On the other hand, IT and insurance companies devote only 4%.
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