Down To Business: Are You IW500 Material?

Innovation. It's not an off-the-shelf commodity. Every company that conducts business over the Web, consolidates its data centers, has survived a CRM or ERP implementation, regularly taps its data warehouse, or rolls out voice over IP isn't an innovator. That's plenty hard work, but such business technology initiatives are table stakes in this day and age.

At InformationWeek, we're particularly picky about applying the innovator moniker. Our tagline is Business Innovation Powered By Technology, but we know that CIOs and other high-level business technology decision makers have PR handlers just as the vendors do, so we're skeptical when we're told that yet another company has transformed itself or its industry with its deft IT touch. For the past 18 years, our InformationWeek 500 story package (and accompanying conference this year) has celebrated the nation's leading business tech innovators, but we settle on our company rankings only after the most rigorous quantitative and qualitative analysis.

We won't reveal the details of that evaluation process here--too many companies would reverse engineer our survey to up their ranking next year--but suffice it to say that we judge innovation differently from the mainstream media. Here are some of the myths and realities of what defines an InformationWeek 500 company.

>> Honorees tend to be the biggest U.S. companies with the biggest IT budgets. Sort of. It's indeed true that InformationWeek 500 candidates must be U.S.-based and have annual revenue of at least $500 million. And while the average revenue of companies on this year's 500 list is $9.47 billion--a size that would place a company smack in the middle of the Fortune 500--our top 25 includes several companies in the $1 billion to $3 billion range, and the average revenue of our top 10 companies is just over $8 billion. The average InformationWeek 500 company will spend $304 million on IT in 2006, or 3.2% of revenue.

>> Company size and IT spending must be trending upward, at least. Au contraire! The average revenue of an InformationWeek 500 company in 2001 was $12.47 billion, 32% more than the current average. The average IT spend in 2001 was $484 million, 59% more than it is today, as IT spending as a percentage of revenue also is on the decline. Far more important than how much you spend is how you spend it.

>> Only the hottest, most successful companies make the InformationWeek 500 cut, since business technology innovation must translate to industry leadership. Not always. While the majority of the 500 are profitable, more than a few are comebacks-in-progress, companies that are leveraging IT as they rebound from major mistakes or market collapses. Cases in point are No. 4 Global Crossing and No. 6 Sun Microsystems.

>> There must be a geographic slant, with companies clustered around Silicon Valley and the Northeast. Those areas certainly have their fair share of honorees, with 64 companies representing California and 55 in New York. But Georgia, Illinois, New Jersey, Ohio, Pennsylvania, and Texas are each home to more than 20 InformationWeek 500 companies. The most surprising InformationWeek 500 hotbed? Missouri, with 18 companies.

>> Past performance is an indicator of future success. Not quite, as anyone who has read a standard securities industry disclaimer can attest. The InformationWeek 500 celebrates recent accomplishment; it's not an institution that hands out tenure.

Last year's No. 1 company, Capital One, is ranked 48th this year--still among the nation's elite IT organizations, but not at the very top of our list. Owens & Minor, the only company to top the InformationWeek 500 two separate years (2003 and 2001), chose not to participate in our survey the past two years. The overall winners in 2004 and 2002, E.&J. Gallo Winery and HIP Health Plan of New York, are still hanging strong at No. 23 and No. 34.

Rob Preston,
VP/Editor In Chief
[email protected]

To find out more about Rob Preston, please visit his page.