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January 8, 2001 |
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Outlook For 2001
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That money is well-spent--Cigna's infrastructure supports about 20 million transactions a day. "Whether our customers are communicating with us over the Internet, at our call centers, or through voice response, it needs to be an integrated experience," Anania says.
Network security and privacy are also among the top priorities this year at Cigna. Health-care insurance providers will face new federal patient-privacy regulations regarding the use of patient information. For instance, health-care companies will no longer be able to identify patients by their social-security numbers, which means legacy applications will need to undergo program coding changes similar to Y2K fixes.
"That's one of the things that keep me up at night," says Anania. "Even if we get the funding to do the work, we need to find enough people with the right legacy skills." Cigna spent about $100 million on Y2K initiatives, and although the privacy-related IT work will be intensive, Anania doesn't expect the project to be quite as big. Cigna will use internal staff and third-party services to complete the coding changes, Anania says.
Projects aimed at improving customer relationships are high on the agenda at The Limited Inc., a $9.7 billion retailer in Columbus, Ohio, that operates apparel chains such as Victoria's Secret, Express, and Bath & Body Works. "We have a five-year rolling view for IT planning and spending," says Tom McFadden, The Limited's CIO. The company's IT budget is the same percentage of revenue as last year, but the total dollar amount is slightly higher. "We need to stick to our guns and do what the brands need us to do," he says, explaining the big-picture view of IT planning in relationship to achieving business goals.
Among the needs are new data-mining and data-modeling applications that will let the retailer better focus its products and improve customer relations, McFadden says. To achieve that, The Limited has assembled a team of in-house staff and outside consultants to work on systems integration and middleware for a new customer relationship management and data-mining project. The development of a best-of-breed data-mining system will be The Limited's most vital IT project this year, he says. The company will also continue to look long and hard at hardware. It's been consolidating and centralizing systems, and plans to buy big-ticket storage systems to support its CRM and data-mining applications, McFadden says.
Crescent Electrical Supply, a privately-held distributor of electrical supplies, electronics, and data communications equipment in East Dubuque, Ill., has also made customer service a main IT focus this year. That will come from integration of its ERP systems with those of its customers, suppliers, and partners, says Scott Jones, Crescent's director of IS/IT and market analysis. This work will enable Crescent to make product information available directly to its customers or via third-party online trade exchanges. While Jones says Crescent's activity in exchanges has cooled down over the last year, its largest customers may expect the company to participate. "We may need to do this to keep their business," he says.
As for IT spending, Crescent's total budget will remain about the same, and Jones doesn't expect outside factors to have much impact on those plans. However, "we'd pull in the horns and ride out the storm if there were a recession," he says. Keeping costs down is possible in part because the company tries to do as much in-house development as possible, as opposed to using outsourced services. That philosophy is evident in Crescent's decision to develop applications in-house rather than purchase software or use hosted services.
"We would use an ASP only if we thought it would exceed our own in-house expectation or if there were significant speed-to-market advantages," Jones says. Over the past year, Crescent has built up its IT bench strength by hiring object-oriented programmers. "If there were a recession, it might impact us hiring additional people," he says.
Small companies such as automotive supplier Contours Ltd. in Orrville, Ohio, are also focused on adding customer, employee, and business-partner services via the Web. Contours, which has annual revenue of between $30 million and $50 million, will spend a little more on IT this year, and the increase will come mainly from hiring IT staff to develop Internet solutions that focus on customer service, IS director Jim Griffith says.
Those capabilities include providing customers access via the Web to order-status information stored on Contours' job-scheduling system. This is important because when Contours receives urgent orders from customers, its manufacturing schedule must be altered. That means other customer orders might be ready at a different time. Giving customers access to that information would allow them to alert Contours if the new order schedule doesn't meet their needs, Griffith says.
Another small company that will explore ways of using the Internet to improve customer relationships is Bay Area Insurance Services Inc. The Bradenton, Fla., provider of homeowner and flood insurance, which has about 50 PC users, will add Web-based help-desk capabilities to provide employees with self-service for everything from IT matters to accessing insurance forms online, network administrator Jerry Bakels says. For its insurance agents and customers, Bay Area Insurance will enhance its Web site to support online claims processing. The goal, Bakels says, is to perform most of the IT work in-house, turning to E-services providers only if necessary.
Bay Area's IT spending will be higher than last year, says Bakels, mainly because the company is replacing its 50 2-year-old Windows 98 PCs with new models that run Windows 2000. The company will either sell or donate the old ones to charity. The older PCs were configured and built in-house by Bakels and a colleague using components purchased from a computer distributor. Bakels says Bay Area may again decide to build its own PCs if it's more cost-effective than buying the finished product.
PCs are also front-and-center at The Limited, which will roll out Windows 2000 on desktops companywide this year, says CIO McFadden. The company and its 120,000 PC users hope to realize efficiency and productivity benefits from the Windows 2000 rollout, he says. The retailer is also evaluating rolling out personal digital assistants companywide this year.
Wireless technologies, meanwhile, are at the top of the list for many IT executives as the new year begins. In fact, half of Outlook For 2001 Study respondents say their companies have made wireless Internet applications a priority for the coming year.
Among them is Bryan Saunders, a senior systems analyst at St. Mary's Hospital in Norfolk, Va. The hospital's IT spending is tight for this year due to delays in the health-services provider getting reimbursed by insurance companies. Still, Saunders is evaluating wireless devices and notebook computers that would improve nurses' ability to enter information at patients' bedsides. Ultimately, this would improve medical recordkeeping, he says. But the jury is still out as to whether the hospital will be able to afford the technology this year, Saunders says.
Development work involving wireless technology is among the key initiatives at Cigna this year, especially for its investment and financial-services businesses, says CIO Anania. "Customers want to be able to make stock trades or 401(k) transactions over their cell phones, PDAs, or other handheld devices," she says. Anania is studying the potential impact of that trend on the company's IT operations.
Mobile-computing solutions will begin "sweeping everywhere" this year, says Glover Ferguson, chief scientist at Accenture, formerly Andersen Consulting. "Europeans have had it for a while, now Americans are starting to get it," he says, referring to the ubiquitous presence of cell phones and the growing use of PDAs and other mobile devices. Ferguson expects more companies to begin embedding wireless technologies and processors for supply-chain and other applications. British Airways, for example, has "intelligent" luggage tags for tracking baggage, he says.
While the majority of companies surveyed by InformationWeek Research say they expect to increase IT spending this year providing there are no dramatic downturns in the economy, some businesses, including large companies, are already trimming their IT dollars. Prudential Insurance will cut about 3% from its $1 billion IT budget this year, CIO Bill Friel says. IT spending will stay about the same as a percentage of revenue, at slightly above 4%, he says.
However, that reduction isn't linked to overall uncertainty in the general economy; rather, it's in line with the company's effort to reduce overall spending. "In 2001, spending will be related to ways to increase revenue and reduce costs," Friel says. If the economy turns sour, Prudential would further "realign investments" in lower-priority projects, he says. Despite the cautious approach, Friel says the company isn't expecting any significant economic downturn this year.
Illustration by D. Kingsley
Photo of McFadden by Janet Adams
Photo of Jones by Dan Dreesen
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