IT Leaders Find New Ways To Win

IT consolidation is critical to saving money after years of growth through acquisition for 66th-ranked Cardinal Health Inc., a distributor of pharmaceuticals and other products to the health-care industry. CIO Jody Davids has spent the last 18 months largely focused on building a single organization through efforts that include scrunching 37 data centers into a desired two. But that doesn't mean abandoning innovation. Cardinal is among the 23% of the InformationWeek 500's top 100 companies that are tinkering with radio-frequency identification. It has tested the technology to track its pharmaceutical products along the supply chain. By comparison, just 15% of the remaining InformationWeek 500 are trying out the technology. Still, Davids admits that while RFID is useful for monitoring pallet-level shipments, it falls short of other needs--for now. "The technology hasn't matured at the unit level. Tests have it at 75% accuracy, and that doesn't cut it," she says. "But we're going to stay on top of it, because it's going to be ready, and we want to be there when it is."

The leading 100 companies generally outperformed the others in business-process efficiencies through increased automation, improved data integration, reengineered applications, and centralized control of IT operations. At 13th-ranked Avnet Inc., an electronic-com- ponents distributor for the tech industry with more than 300 suppliers and 100,000 customers worldwide, the focus is on automating its supply chain. "We're looking to change the game in our industry," says Avnet CIO Ed Kamins. "We don't design products, so our strategic competitive advantage is in our processes. "

For Avnet, an impediment to a smooth-flowing supply chain was the quoting and ordering process that defined the relationships among multiple players: component makers, Avnet, and the value-added resellers that buy components on behalf of their customers. Historically, deals required a flurry of phone calls among these parties as they collected quotes, decided on which products best met the needs of customers, and then ordered and delivered the products. Avnet also faces an industry shift: Value-added resellers no longer look for information from single manufacturers but want comparative information across several product lines.

So Kamins' team built an order-management system called Request to Order, or R20, that integrates configuration, quoting, lead-tracking, and ordering information in a single portal. VARs access the portal directly to view and process orders across multiple brands from a single source. The results for Avnet include a 20% increase in productivity in presales processes and increased revenue from associated sales such as services and leasing programs. And Avnet clearly answered an industry need: Three-quarters of its VAR partners have adopted the new process. "When we put it online late last fall, we had to increase our server farm because the level of impact was three or four times greater than what we anticipated," Kamins says. "This makes us faster, more accurate, and it builds a better customer relationship."

For Burlington Northern Santa Fe Corp., ranked 50th in the InformationWeek 500, two automation projects top the corporate agenda for building what it calls an "eSynchronous" railroad. "We're making a near-real-time railroad where all assets and people are connected, tracked, and working collaboratively, and we're delivering information at the same speed as the travel of the freight," says Jeffrey Campbell, VP of technology services and CIO at Burlington Northern.

The manual processes of registering cargo pickups and deliveries, tracking cargo, and allocating crew assignments were replaced by a voice-technology-based system that converts voice messages to Web-enabled data, giving employees and customers access to near-real-time information about the shipping process. Already, the project has more than paid for itself in efficiency gains, Campbell says.

A second project, called Instantaneous Interline Pricing, has revolutionized the way the rail-transport industry works. The old approach to rail shipping was for a shipper to call each railroad along the route to gather pricing information that took into consideration cargo weight, regulatory fees, and loading and unloading logistics. "Often, shippers wouldn't know their cost until after the shipment happened," Campbell says. The railroad industry struck a collaborative agreement to publish all its rates by origin and destination, which Burlington Northern has made available via Web services. Now customers can get sea-to-sea shipment costs across multiple carriers the same way an airline customer can book flights online. "It finally put rails on par with the rest of transportation," Campbell says.

Combined, the two projects have resulted in improved accuracy of shipping reports, a better-organized workforce, more loyal customers generating increased revenue, and significant back-office cost reductions.

Standard Register, which provides marketing materials and form-printing services, ranked 43rd on our list not because it outsourced infrastructure management to Hewlett-Packard and Computer Sciences Corp., though that did help with cost cutting. Rather, Standard Register now can focus on developing products that offer greater value to its customers.

For instance, IT staff developed a digital pen and paper to help customers in form-heavy industries and sales organizations, such as remote medical-service providers, save time and money. The technology includes an ink-writing pen that contains a digital camera and specially patterned paper. The camera reads the pen's strokes and translates the written information to XML data, which can be communicated wirelessly to a hosted application service provider using secure PDAs or Bluetooth technology. Done manually, the form-processing procedure took up to 24 hours, slowing down tasks such as orders and billing. "This has the ability to transform the supply chain of our customers, and we're seeing a lot of play in large distributed organizations," Standard Register's VP and CTO, Joe Morgan, says.

Changing the way Mellon Financial Corp. deals with customers is a top priority for its IT staff. The financial-services firm, ranked 40th, embarked on a front-office reengineering initiative not only to improve customer satisfaction but also to increase the efficiency of its customer-facing employees. "The front office is the point where the highest cost of resources lies and where the face of the company is seen," CIO Kevin Shearan says.

The firm has spent the last 18 months implementing an Onyx Software Corp. sales-force-automation and CRM system to optimize how employees work. The rollout was deployed across business units where its effectiveness could be seen at each phase of the project. "I don't have an appetite for long-term projects where I have to wait until the end to get the returns," Shearan says. "Each phase needed to show value after the first six months, and each delivery had a business value in and of itself."

Top companies apply performance metrics and standards to assess their business-technology projects. Eight in 10 of our top 100 companies use a balanced-scorecard approach to measuring performance, 64% use the Information Technology Infrastructure Library, half follow ISO 9000x practices, and 43% apply Six Sigma thinking. In all cases, those percentages are higher than among the remaining InformationWeek 500 companies. Since implementing a balanced-scorecard approach in 2001, consulting firm Accenture (ranked 36th) has cut IT spending in half as a percentage of revenue, and its focus on operational excellence has cut by half the cost per user, says CIO Frank Modruson.

As businesses look forward to next year, there will certainly be more opportunities for efficiency, transformation, and customer service. After all, business-technology advantage isn't a tenured position. But these 500 companies are setting the standard today.

Illustration By Paul Watson

Continue to the sidebar:
Choosing The Winners

Return to the 2005 InformationWeek 500 homepage