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Back To Basics With TechnologyBack To Basics With Technology

The slow economy has left little room for splashy IT projects.

InformationWeek Staff

September 15, 2001

12 Min Read

InformationWeek 500 - CONSUMER GOODSJeff Coomer sounds almost apologetic when he explains that the information technology he's most excited about has nothing to do with a slick consumer Web site or the latest business-to-business initiative. For the VP of IT at Black & Decker Co., the keywords are infrastructure and operations. His biggest priority is enterprise resource planning. "We want to ensure our uptime throughout the infrastructure. It's like the 1980s," says Coomer, who oversees an IT budget of $70 million. During the last year, his worldwide staff has been dedicated to improving IT efficiency.

B-to-B might as well stand for "back to basics" this year in the consumer packaged-goods industry, as the companies in this year's InformationWeek 500 show a decided preference for infrastructure and fundamentals over glitzy business-to-consumer Web sites and flavor-of-the-month E-business initiatives. Even when there's a strong B-to-B push, IT is taking a breather from the breakneck speed of Java and HTML development that marked 1999 and much of 2000. Harriet Edelman

Smaller IT projects have become more important at Avon, senior VP Edelman says. This time last year, Harriet Edelman, senior VP at Avon Products Inc., was gearing up for a major launch of a Web initiative that let nearly 17,000 representatives create personalized B-to-C portals for use with their customers. Another estimated 40,000 sales reps use the Web to manage their transactions and administrative tasks online. Since the site's launch in September, Edelman says, development is ongoing, but it's more incremental and usually focused on improving ease of navigation. Breaking IT efforts into manageable chunks is another trend that comes up time and again in conversations with IT executives, and Edelman is no exception. "With too long a project tunnel, you can lose your visibility," says Edelman, who oversees a worldwide staff of about 1,400 and an annual budget of more than $200 million. She prefers to focus on portfolio management. "We keep our IT efforts tied to business changes and shorter planning cycles." This year's emphasis: infrastructure, applications, and systems. Portfolio management may well be a euphemism for doing more with less. The drive to cut costs and save has always been strong at Avon, but perhaps never stronger than in the current economic climate, despite the fact that IT helps process some 60 million orders a year, Edelman says. "We're a lot more disciplined about the project-initiation stage. You can trace most problems that arise back to the DNA stage of any given project." Like his colleagues at other consumer-goods companies, Mark Gulling, Eastman Kodak Co.'s CIO, is on a never-ending quest to reduce costs within his $415 million budget. And as he puts it, "There's always more you can do. The company won't come to me and say, 'Here's another $100 million, go spend it wisely.' I need to make my own headroom." To do this, Gulling constantly looks to see where he can take money out of older technologies and reinvest it. For example, by nixing legacy systems such as old order-entry applications and Y2K efforts, Gulling was able to fund Eastman Kodak's ERP initiative. By year's end, an SAP R/3 system will be deployed across 70% of the company. There's a single global interface and a single data center in Rochester, N.Y., that handles all information. To ensure uptime, disks are triple-mirrored and backed up four times an hour. If all that fails, there's a disaster-recovery site in Canada. "The idea of a single global interface is the kernel of everything we do," Gulling says. Not long ago, Eastman Kodak's applications portfolio involved 2,600 apps strung together with 4,000 interfaces. Legacy systems well-entrenched in manufacturing (film, for example) won't be covered by ERP, but Gulling says, the company is well on its way to its goal wherein ERP will involve fewer than 10 major apps and 700 interfaces. And that's not all: Gulling has also decreased spending on regional systems. In what Gulling calls a strategy of deliberate expansion, he quickly realized that commonalities across regions were more meaningful than cultural differences. That realization has translated into a more simplified IT process as well as significant cost savings. "Now we develop an application once and deploy it." "Deliberate" may well be the watchword for this year's IT planning and deployment at consumer-goods companies. The high-flying "I don't care how, but I want it now" battle cry from last year's CEO has become a far more subdued but serious return to fundamentals. This isn't to say that B-to-B and E-commerce are going away. Far from it. It's just that for this group of IT executives, such initiatives are more tightly integrated into traditional infrastructure and principles than ever before. The Internet doesn't change basic principles, says Ed Toben, Colgate-Palmolive Co.'s CIO. "If we learned anything, it's that there has to be something behind the curtain," he says. "You must have the base information and base infrastructure to build to B-to-B. You can't leap over steps." His IT philosophy, and practice, is to spend a lot of effort building a strong foundation and expand on it, rather than managing multiple, disparate efforts at once. "It's not overly exciting, but it builds results." The strong foundation in this case is an SAP R/3 system: 95% of Colgate-Palmolive is running on it. Some of Toben's nearly 900 staff members are gearing up for newer SAP offerings such as the Business Warehouse data warehouse and the Advance Planning Optimization supply-chain system, with plans to expand that globally. It's no small effort: While a small pilot program is up and running in the United States, Toben expects it will be an ongoing effort to make the new systems fully operational globally. After a year of strong growth in 2000, Panasonic USA is also focusing on the basics. "It's a tight market, which presents a severe challenge," says Robert Schwartz, president of the recently formed Panasonic Management Information Technology Co., Panasonic's IT division. "With continual bad news in the media, the public tends to tighten its purse strings, especially in the discretionary-spending category." Like many of his IT peers in the consumer-goods industry, Schwartz is concentrating on infrastructure. His IT department will hold steady at around 350 IT staffers and 50 consultants. His budget this year will range from $120 million to $150 million, depending on special projects. The biggest initiative involves an enormous integration effort. During the past several years, Panasonic has been rolling out R/3, supply-chain systems from i2 Technologies Inc., and customer-relationship management systems from Siebel Systems Inc. Any one of those would be a major undertaking for most companies. The mandate is to keep costs down; Schwartz predicts that return on investment will become more important. To control costs, he's reining in outside staffing, as well as changing his approach. By using a Web-based staffing firm called Jobreq.com, he has effectively eliminated the intermediary and brought costs down by 7%; he also gets his requisitions filled within 48 to 72 hours. There's a certain "back to the future" element to all of this. Take Black & Decker's Coomer. He's looking to apply the much-vaunted Six Sigma methodology, a business initiative pioneered at Motorola Inc. in the 1980s that uses standard statistical analysis for performance improvement. Black & Decker is recasting its monthly IT operation metrics to Six Sigma. "Those metrics can help you better identify problem areas," says Coomer, adding that the company sees any time its system is unavailable as a missed opportunity. For Black & Decker, this means keeping a monthly scorecard to chart IT performance, just like in the mainframe days. It's a bit harder, though. Tracking response time, key batch-work completion, and uptime on one mainframe is far simpler than doing that same task across the 50-plus Alpha servers and 150 Intel servers the company uses. Coomer is starting with what's most vital: mail servers, then an SAP upgrade. The plan is to focus on external business, such as supply-chain improvements designed to increase the accuracy of supply planning, implementing SAP's Business Warehouse, and revamping customer-facing Web sites. Sales-force automation is also in its initial stages at Black & Decker, starting with an audit. "We looked at what our sales guys do, and they don't really need laptops; what they need are PCs at home," Coomer says. Using these PCs, salespeople will have access to online customer sites that are customized for their accounts. For example, the sales team that works with Home Depot Inc. has an intranet specific to it. So far, the system has been rolled out to some 100 salespeople and will eventually go to an additional 500. Says Coomer, "Operations are going to be an increasingly big deal for the next while." Darren Bien, an analyst at Jupiter Media Metrix, says that what IT executives such as Coomer say they're doing is consistent with what he's noticing in his own research: Given the current economic climate, it's a good time to retrench. "There's been lots of innovation in the last three years to enable online activity, but it's been very R&D intensive, and much of it has come in a disruptive fashion," Bien says. "Now is the time to bolt it together with a good infrastructure." Who would've predicted that last summer? The past two years were all about the Web and B-to-B and B-to-C initiatives--sometimes backed with a solid infrastructure, sometimes by nothing more than a simple front end. It seems this year marks a pendulum swing to more solidly grounded IT development efforts in the consumer-goods industry. Closeup Consumer Goods Rank Company Revenue in millions Revenue Change Income (loss) in millions Income Change IT employees 64 WestPoint Stevens Inc. $1,816 -3.6% ($63) -160.8% 146 131 Panasonic USA $67,000 - - - - 150 Whirlpool Corp. $10,325 -1.8% $367 5.8% 666 180 Polaroid Corp. $1,856 -6.2% $38 333.3% 600 181 Liz Claiborne Inc. $3,104 10.6% $185 -4.1% 140 201 Ralston Purina Co. $2,763 2.7% $530 5.0% 540 281 Maytag Corp. $4,248 -1.8% $201 -38.8% 287 323 Black & Decker Co. $4,561 0.9% $282 -6.1% 460 360 Avon Products Inc. $5,674 7.0% $478 58.0% 1,492 369 S.C. Johnson & Son Inc. $5,000 - - - 400 384 Eastman Kodak Co. $13,994 -1.0% $1,407 1.1% 2,450 424 Kellwood Co. $2,400 7.7% $61 4.8% 220 437 Jones Apparel Group Inc. $4,121 31.7% $301 60.1% 150 459 Colgate-Palmolive Co. $9,358 3.0% $1,063 13.5% 850 466 Dimon Inc. $1,474 -18.8% $18 460.0% 90 478 Sunbeam Corp. - - - - 415 Financial data from public information sources. Figures are for most recent fiscal year.
IT employee information from InformationWeek 500 qualifying survey. Requested company footnotes at informationweek.com/855/splash.htm. SnapShot 500/Consumer Goods Inside companies Average portion of revenue spent on IT 3% Portion of IT organizations that sell services or IT products to other companies 19% Portion of companies that say wireless E-commerce will contribute to E-business revenue stream 38% Senior IT executive is a member of executive management committee 88% Average portion of customers included in electronic supply chain 51% How companies divide their IT budgets New product and technology purchases 21% IT consulting and outsourcing 16% Research and development 5% Salaries and benefits 33% Applications 14% Everything else 11% How often companies re-examine their IT spending plans Daily - Weekly 6% Monthly 69% Quarterly 19% Twice a year 6% Annually - DATA: INFORMATIONWEEK RESEARCH

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