Dow Chemical Co. has had its share of headaches as an early adopter of technology. Most recently, it had to hire IBM to take over building a major voice-over-IP network when EDS, three years into the effort, couldn't deliver on it. But the company hasn't lost its taste for getting in early.
Taking risks on technology puts Dow ahead of the game, says David Kepler, Dow's CIO and corporate VP of shared services.
Photo by John Sobczak
The IBM project begun last fall is on track, Kepler says. While Dow is about two years behind its original plan to get the VoIP network fully deployed, Kepler says, the company remains ahead of most others in employing the technology, which he thinks will bring lower communications costs and other benefits. "We're still ahead of the game by taking risks," he says. "In the end, it hasn't disrupted the business process."
Dow likes to adopt new technology that has the potential to scale because of the eventual savings it can foster, Kepler says. For instance, Dow began exploring SAP enterprise-resource-planning systems in the late 1980s and implemented the software vendor's financial and transportation systems in the mid-1990s, well before most other companies did. "We've lived with that investment for 10 years," he says. "As an early adopter, you run into scaling problems, but we have the competency to handle it and move forward."
Indeed, early investments in technologies and the infrastructure that supports them has allowed companies like Dow to become more nimble and shift their spending and staffing priorities away from that infrastructure and toward application management, software, and other areas, according to consulting firm The Hackett Group, which designated Dow a world-class IT organization. Hackett, which maintains a database of thousands of companies' practices, defines world class as an organization in the top quartile of its database in terms of efficiency (cost and productivity) and effectiveness (quality and business value).
Overall, Hackett found that world-class users of business technology on average spend 18% less than their typical peers and operate with 36% fewer IT staffers. They also bring projects in on time and under budget more than 30% more often. In addition, world-class operations deliver business benefits by dramatically increasing the automation of a wide array of routine business transactions, providing operational efficiency, and freeing staff time throughout the organization to focus on more value-added activities.
For instance, outsourcing networking functions to IBM under a seven-year, $1.1 billion contract frees Dow IT staffers to address matters key to the production of plastics and chemicals, the company's core business. The VoIP contract includes other infrastructure-management services, such as LAN, E-mail, and application support. "From an IT point of view, everything runs on wire, and [activities] closer to the wire don't differentiate you in the market," Kepler says, noting that those processes can be outsourced. "People who hang onto the whole process spend a tremendous amount of time doing things others can do more effectively."