As optimism inches up but risk tolerance declines, quick-change strategies are the rule of the day
Is it time to cut, freeze, or increase the budget? Disagreement is pervasive this year as to what the correct strategy is for business-technology spending.
That's according to Outlook 2003, this year's edition of the start-of-the-year survey of technology investing that InformationWeek Research has taken since 1998. Though the trend is more positive than negative this year-40% of 300 business-technology managers polled expect budget increases, while a quarter intend to cut-that's a far cry from the consensus of 2001, when 72% of managers planned to up spending. Even among those planning to increase or maintain their budgets, there's considerable caution, since many started last year expecting better times to be here by now.
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Still, amid the divergent strategies, there's considerably more optimism than there was a year ago. Seventy-three percent of managers expect their companies' revenue to grow this year, while only 60% said that last year. Of course, beating the previous year's numbers looks a bit easier with 2002 as the benchmark. However, many business-technology leaders are counting on IT to play a big part in meeting sales goals.
That's the case at the financial-services company KeyCorp, a regional bank that's holding its IT spending flat compared with 2002 spending, which was cut from 2001. The company wants to build deeper relationships with customers to promote cross-sell-ing, such as having retail bankers offer more complicated loans and investment plans. That requires better technology, such as a data-mining project already under way that will identify the best prospective customers for home-equity loans or college-savings plans and to help bankers make better lending decisions.
The biggest business-technology outlay-for customer-relationship management software-won't come until later this year, after KeyCorp makes the necessary cultural and workflow changes. "We're avoiding speculative investments," chief technology officer Bob Rickert says. "I'm confident that the technology investments we make will result in returns."
Kinko's Inc. expects to more than double its IT capital budget compared with any year in its history. Its No. 1 priority: "Driving up top-line volume," says Allen Dickason, CTO for the $2 billion-a-year privately held printing- and copy-services chain. This year, Kinko's will completely rewrite the user interface of its DocStore online document-storage services to make it a more-effective E-commerce tool, a move that will require reworking some of the underlying architecture.
Kinko's also is working with Microsoft to use .Net technology to build into the vendor's desktop products the ability for customers to use the Web or wireless connections to send documents to Kinko's to be printed and picked up at stores. "The world's largest virtual printer," touts Dickason, who expects the service to be a hit with business travelers.
The company also will roll out the Clarify CRM product from Amdocs Ltd., which will give 600 remote salespeople and account managers access to centralized customer information, replacing the salespeople's individual databases.
Despite Kinko's ambitious project, interest in CRM in general has cooled. While the goals most companies have for technology remain centered on improving customer service, optimizing business processes, boosting productivity, and using customer data better-these are the top business priorities for the coming year, cited by about four out of five managers-the number of managers citing CRM as a technology priority slipped from 58% last year to a little more than half this year.
Overall, managers' tolerance for risk is down. First, they're taking on fewer projects and technologies. More than three-quarters of the 34 categories of technology projects tracked in both last year's survey and this year's show a decrease in the number of managers listing them among their upcoming projects. Second, plans for cutting-edge technologies, such as Web services and encryption, have dropped sharply, as have plans for technologies that can be tough to measure in terms of concrete returns, such as knowledge-management and remote-access software.