IT Execs Focus On Providing Value

IT budgets remain under pressure, but the focus is slowly shifting from cost-cutting to an emphasis on providing value to the business operations IT serves, said IT executives on a panel at the AMR Research Fall Executive Conference in Boston. Commenting on a range of topics, the four IT managers said they're adopting outsourcing as an IT strategy and appear united in having a love-hate relationship with their major IT vendors.

"The last three years it's been cost, cost, cost," said Randy Stone, VP and CIO at test equipment maker Teradyne Inc., noting at Monday's session that her department has cut expenses through server and data-center consolidation. But as the economy rebounds, the focus is now "where can we invest to add value to the business," she says.

Top management at Dial Corp. realizes that the consumer-packaged-goods company has to invest in IT to stay competitive, said senior VP and CIO Evon Jones, citing radio frequency identification technology as one example. But that doesn't let him off the hook for justifying spending. "My controller and (chief financial officer) still say 'Where's the payback?'" he said.

Chemical manufacturer Eastman Co. has been investing in new customer-relationship-management, marketing, and security software, says Jerry Hale, VP and CIO. But cost pressures remain. "We'll probably take our IT budgets down another 10% in 2004," he said.

Dial has outsourced almost its entire IT operation, Jones said, going from 130 people to 10. Kept in-house were a few top IT strategy and architecture-development employees and a core team of SAP experts. C4 Systems, a division of General Dynamics Corp., has likewise outsourced most of its IT operation, said Robert Dutton, VP of IT and systems. Eastman has outsourced a "significant amount" of development work and its help-desk operation.

Dial is adopting RFID as Wal-Mart Stores Inc., one of its biggest customers, requires. C4 is doing likewise at the request of the Department of Defense. Some of Eastman's customers are asking that the chemical maker start using RFID tags on pallets by 2005 or 2006, Hale says.

The executives also expressed some frustration with their leading IT vendors. C4's Dutton is being forced to upgrade its old copy of Exchange Server, although the software runs fine, because Microsoft will no longer support it. That also means adding Active Directory and upgrading the Windows Server that Exchange runs on, Dutton said.

Others griped about the maintenance fees their vendors try to charge. Stone was critical of maintenance and upgrade costs Oracle charges Teradyne, but praised the vendor for its support. Hale echoed those comments without naming a specific vendor. Do they provide Eastman with what it needs? "I think we get what we demand out of them," he said.

The IT executives generally agreed their purchasing strategy is to buy from a few core IT vendors, but said they're open to buying from small "best-of-breed" vendors if they have a technology need their major suppliers can't meet. All four IT executives also said their companies are experimenting with limited Linux deployments. Said Hale, "We like it because it keeps pricing pressure on Microsoft."