Why IT Must Get Back Into Growth Mode 2

Our research shows a clear uptick in growth-oriented IT projects. But after all the cost-cutting, CIOs must prove they left enough muscle to once again drive revenue and innovation.
Imagine you have just seven days to get to know your customers better. Seven days to understand their needs and wants and fine-tune your product for them. After those seven days, you've lost the chance to sell them more of what they would have loved to buy.

That's the challenge and opportunity Royal Caribbean International CIO Bill Martin has on several of the company's newest, tech-rich cruise ships.

Once guests are aboard certain ships, a small team on shore has begun running analytics on passenger demographics, combining those results with real-time sales activity on the ship. For instance, does a spa have open slots? Royal Caribbean can promote those on in-room interactive TVs to only those guests most likely to take up the offer.

Martin is sending a clear message from the high seas: Opportunity for higher revenue is out there, and IT is going to help drive it. "We see growth coming back," he says, and from around the world, not just North America.

No one's calling a blockbuster economic recovery. But we surveyed 333 top IT leaders, either C-level or VP, and found a marked increase in optimism compared with a year ago.

Last year, just 18% of the senior IT execs we surveyed thought "introducing an IT-led product or service" would be a main area of IT innovation. This year, twice as many respondents, 36%, see things that way--the second most-cited area of innovation, after making business processes more efficient. Cost cutting, meanwhile, has fallen--32% now consider that a top innovation priority, down from 40% last year.

Are CIOs in a position to deliver growth? That's the biggest concern CIOs in our survey have--that their organizations can't execute fast enough to meet business needs. IT leaders did their part during the cost cutting, reducing staff and consolidating IT infrastructure. Did they leave enough muscle to respond to growth opportunities?

There's one other risk: missing the growth opportunity entirely. Look at the survey numbers another way and you see that most business technology leaders still aren't using IT to drive revenue and new products. IT tends to be most comfortable making business processes more efficient rather than driving sales and creating new products and working with customers. But with the pressure back on companies to grow, IT needs to do its part.

Although it's not raining money for IT projects, the budget slashing of the past 18 months has eased. Half of the business technology leaders we surveyed see their budgets rising this year, with more than a third of them seeing increases of 5% or more. Just under one-fourth see IT budgets decreasing.

Furthermore, about two-thirds of the leaders we surveyed think their companies' revenue will increase this year (17% say significantly), and only 11% predict revenue will fall.

After a year of skimping on spending, often stretching the life cycle of their PCs and servers, some IT leaders do worry about keeping the lights on. "The business is asking for growth revenue goals that are a real stretch," says one IT leader, who wanted to stay anonymous. "IT budgets are advertised as increasing and as budgeted for investment, without sufficient monies being placed on keeping the foundations stable."

Confidence in growth isn't strong enough to fuel a lot of IT organization hiring, even though CIOs are worried about having the horses to get projects done. One-third say hiring's still frozen, though only 4% say they're more likely to lay off than hire. About a third say they're looking to hire, but only for very specialized skills. Just 11% of the CIOs we surveyed are looking to hire across many areas.

What's On The Agenda

Among the major IT implementations planned for this year, 40% of the business technology leaders we surveyed have a major collaboration project scoped out.

One example is mutual fund company Vanguard, which in the past few weeks began letting employees access work e-mail from their personal iPhones and Android-based phones, using Good Technology for encryption and smart token authentication. Vanguard is also trying to make company-issued BlackBerrys more useful. The company's strategy had been to lock down every feature that wasn't expressly needed for work, but now employees get more of those "non-work" tools, including GPS and cameras, though every feature goes through a compliance and security screen.

Collaboration efforts like these provide only indirect support for growth, by making employees more productive. But Vanguard looks for a more direct link, treating employees as a proving ground for technology it plans to bring to customers.

For instance, Vanguard is experimenting with an internal SharePoint site for IT projects that potentially could be extended to clients, says Abha Kumar, an IT principal who leads the effort. Vanguard investment advisers and clients could potentially collaborate on such a site, or clients could interact with one another there--for example, people who are newly retired or close to sending kids to college could gather to discuss investment issues. By using the SharePoint site internally first, Vanguard gets the bugs out and identifies which features are most useful. "Then we have real experience as we expand outside," Kumar says. "We get to play around with the technology and actually start to see how it impacts what we do."

Another big innovation priority for CIOs in our survey is the mobile Internet. Although just 15% of survey respondents say they have a major application on mobile devices today, more than a fourth of them plan to do a major implementation this year. And for companies like spice maker McCormick, such apps are changing IT's role.

Remember how 36% of the business tech leaders we surveyed say they expect IT to drive products and services this year? Jerry Wolfe, CIO of McCormick, says that a couple of years ago he would have struggled with whether IT had that kind of role in new products. Now he's working with the company's sales and marketing teams "to have a different set of discussions with our retail partners," as they both figure out how to build closer ties with customers over the Web, particularly the mobile Web.

McCormick has an iPhone recipe app, for example, and Wolfe, who's also head of supply chain operations, thinks that app could be co-branded with a retailer. It's working with one retailer to tie McCormick's recipe-driven Web site in with the retailer's campaign for the summer grilling season. McCormick offers a "virtual recipe box" download to bring together all of a consumer's recipes.

At Ford Motor, the mobile Internet has a different meaning. It's about giving drivers Internet access and social networking, safely, in their vehicles. To experiment, Ford let a group of University of Michigan students, as part of their coursework, develop social networking applications for the Sync in-vehicle personal tech system in the new Fiesta compact car. The applications aren't in production, but one example is an app that lets people traveling in a multivehicle caravan share information about their location and stops, helping everyone stay together on a road trip. Ford also partners with Google so that Google Maps users can click a "send to Sync" button to send directions to their vehicle, and it's partnering with other content providers to extend Sync "beyond media players and phones," CIO Nick Smither says. (See p. 14 for more.)

Better Use Of Data

We also asked CIOs what their single biggest opportunity is personally. The No. 1 answer: Use data to influence new products and drive growth, cited by 29%.

Martin at Royal Caribbean is just getting started with such an effort. Not all the data the cruise line collects has to be analyzed to be valuable. Some of it just needs to be shared, like how many people are standing in line for a restaurant.

Royal Caribbean's Oasis of the Seas is the largest cruise ship ever launched, and one of the company's guiding principles is zero tolerance for lines, Martin says. So at each of the 24 restaurants on the ship, shape-recognition cameras count the number of people waiting to get in and broadcast that information as red-yellow-green signals to 300 digital signs around the ship, so that people can select the least-crowded venues.

Royal Caribbean ships collect more data than ever during a cruise, over a 10-Gbps IP network that connects every cash register and booking system, so analysts know what's happening in real time. And with interactive TV in each guest room, Royal Caribbean can deliver customized messages. "We're still learning how best to use that," Martin says.

The cruise line is also trying to get to know guests better before they board, via new Web site features that let them plan and book activities ahead of time. And it's putting more technology in front of passengers while on the ship. Guests on Oasis of the Seas, for example, can outfit their children with a wristband that sends a signal to one of 900 wireless access points on the ship, connected to an iPhone app that shows parents where their little stinkers are playing by displaying a blip on a diagram of the ship.

To look for data-driven revenue opportunities more actively, Martin created what he calls a "business information group" of half a dozen people. Rather than implement IT projects or support IT operations, group members look at the data various operating units generate and help them figure out what else those units need to make better decisions. "We've had the tools. We've never leveraged them as well as we do with this," says Martin, whose team makes use of Oracle's OBIEE analytics and dashboard software.

It's also interesting to note what isn't a big worry for business technology leaders. Far down the list of concerns for survey respondents is having the right business unit relationships and having a system to prioritize IT projects--the age-old "business-IT alignment" issues.

Other survey results, however, raise questions about whether IT organizations are focused on the right mission. Only 14% of respondents consider meeting with customers as a primary responsibility.

Among companies that expect revenue to grow this year, only half of them are increasing the number of growth-oriented IT projects they have going compared with a year ago. Thirty-eight percent say they're holding the number of projects steady, while 12% are either cutting them back or have no such projects in the works.

That 50-50 split is puzzling. Is IT not an integral part of those companies' growth agendas? Are they too internally focused, running an ever-more efficient IT operation while not looped into customer and revenue opportunities? Are they not up to the job, or considered too slow or overworked to be trusted with vital growth initiatives?

Business technology leaders need to do a gut check about their teams' capabilities and how they tie into their companies' goals. Given the chance, are we really ready for growth?

Write to Chris Murphy at [email protected]