Catch The Wind

Business-technology leaders are optimistic about their companies' prospects this year. But they know IT budgets to support that growth will be tight.
At Harrah's Entertainment Inc., the goal for 2004 is to use technology to improve the time-honored casino tradition of giving perks to good customers. That will require turning the massive data warehouse used to collect and analyze guest information derived from Harrah's Total Rewards customer-loyalty program into a source of real-time information. The goal: to track the activities and spending habits of its top 100,000 VIP customers and reward them in real time. Harrah's has plenty of company--three-quarters of survey respondents say they'll establish processes that support real-time information this year, and 61% say data-warehouse technology is a priority.

The Total Rewards system is powered by warehouse technology from NCR Corp.'s Teradata division. Harrah's plans to adapt that system with Teradata's active data-warehousing technology to perform customer-data analysis in real time, rather than after a guest has left a casino. Using messaging middleware from Tibco Software Inc., the data warehouse will be tied into recently installed customer-contact applications from Blue Martini Software Inc.

Harrah's, which operates 26 casinos, is expecting solid sales growth this year, but tax increases recently enacted in Illinois, New Jersey, and other states likely will take a bite out of profits. CIO Tim Stanley has his own bottom line: Harrah's measures IT spending as an operating profit or loss, and Stanley expects 6% operating-profit growth on the IT budget this year and 7% profit growth on IT capital spending.

Patty Morrison -- Photo by Jeffery Salter/Redux Pictures

With a flat IT budget, cutting costs and being more efficient let Office Depot reinvest in growth initiatives, CIO Morrison says.

Photo of Patty Morrison by Jeffery Salter/Redux Pictures
Office-supply company Office Depot Inc. has several major IT initiatives planned for the year involving supply-chain management, merchandise planning, and warehouse operations. The company has multiple sales channels, including direct delivery to companies, Office Depot aisles within grocery stores, and online sales; only 46% of its sales come from its retail stores. Business technology and processes for managing and restocking those multiple channels must be flexible and efficient, CIO Patty Morrison says.

This year, Office Depot plans to install supply-chain-management and merchandise-planning applications from Retek Inc. The software will help the company work with its suppliers to complete product-assortment-planning, sales-forecasting, and price-optimization tasks, Morrison says. The retailer also will use software from Manhattan Associates to improve the efficiency of its warehouse operations, especially in Europe, where it's integrating operations with those of office-product supplier Guilbert SA, which Office Depot acquired in 2003.

Morrison's IT budget has remained relatively flat, not including major initiatives such as the supply-chain and merchandise-planning projects. The company is considering shrinking the number of IT vendors it works with, particularly companies that provide contract employees. But cost cutting, per se, isn't the goal. "The priority is to find efficiencies so we can reinvest those dollars in growth initiatives," Morrison says.

It's an increasingly common strategy to ask business-technology groups to cut costs to fund new initiatives. With 54% of executives in our Outlook study expecting total IT spending to be less than or only equal to 2003, this will be a year of both squeezing budgets and adding projects. And while hopes are high for steady improvement in the economy and a more prosperous year ahead, business-technology professionals must accept that IT investment will likely lag, rather than lead, any recovery.

-- with Rick Whiting

Illustration by Michael Morgenstern

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