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Friday, February 11, 2005

CEO's Are Beginning to Get a Grip on Information Technology

The word technology,once inspired so much passion, turned sour for many business leaders after the pop of the Internet bubble and the botched installations of major information systems. Business investment in technology slowed to a crawl as CEOs became far more skeptical about new technology projects, chief information officers and technology vendors.
Judging from a roundtable discussion on the subject, sponsored by Manugistics, it appears that top executives are warming to technology once again. But this time around, CEOs will better manage the IT function. And they hope that, rather than wasting hundreds of millions of dollars, their companies will extract far more value from technology than ever before. As General Motors North America President Gary Cowger put it, "The power, the speed, the bandwidth—they’re all allowing us to deliver what we’ve been fascinated with since the 1980s."
Technology decision-making was done in isolation of business decision-making. To better integrate technology decisions into the strategy of the business, more CEOs are installing CIOs who have real business experience as opposed to being pure technocrats. And they are exposing them more directly and over a sustained period of time to leaders of their business units. Companies also are putting heavy pressure on vendors to ensure their software pays off. "The approach where you go out and buy all this software and then you go pay for a bunch of services that you’re buying by the hour, and you’re taking all that risk before you even get a payback—is that really the right business model?" posed John Forsyth, CEO of Wellmark Blue Cross and Blue Shield of Iowa and South Dakota. "I sense that people are wanting to see the vendors be more involved and help in guaranteeing the return on that investment." Vivek Paul, CEO of the large Indian outsourcing software firm Wipro, said: “You’ve got to be able to completely focus on taking costs out of everything that’s supporting your day-to-day processes, and focusing very hard on the things that give you that extra competitive advantage. If you’re not looking at both things with equal passion, you’re missing something.” Of course, farming out technology is what butters Wipro’s bread. Even when it’s clear what stays in-house, the customize-or-standardize question comes up. Standard packages can be cheaper, training may be more widely available, and software may be more scalable and integrate better with existing systems.
"We would argue you need more standardization, you need more open standards, because technology is going to change even quicker in the future. You’ve got to be able to plug in technology, take it out and replace it with new technologies," said Saul Berman of IBM Business Consulting Services. "It’s what we call a ‘spaghetti mess.’ But the more you don’t have to customize, and the more you can componentize it, then you have more flexibility as technology changes." As technology spending picks up in 2005, as all indicators suggest, the overall U.S. economy could get a lift because this wave of spending will be more tightly linked to real business objectives. Less spending will be of the ephemeral flash-in-the-pan variety. All of which is good news indeed.

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