What's on today's shopping lists
By Larry Dignan
Staff Writer, CNET News.com
February 12, 2003, 4:00 AM PT
Steven Matheys, chief information officer of Schneider National, is a technology maker's dream.
Schneider National, a trucking company based in Green Bay, Wis., is planning to buy new hardware and customer relationship management software with an information technology budget that is up about 25 percent this year. Although that spending level is roughly the same as it was in 2001, any increase at all is considered huge in this stagnant economy.
"If you read the tea leaves it looks like things will pick up, but the budgets are tight," said Matheys, whose company has $2.4 billion in annual revenue. However, he added: "It's a year of cautious optimism."
That thinking will translate into some welcome spending by the technology officers of Corporate America for the first time in what seems like an eternity. Yet the boom days have by no means returned: In this conservative era, companies are looking to buy only those products that will either save money or are deemed essential for growth in years to come--in other words, the closest thing to a sure bet for return on investment somewhere down the line.
The buzzwords of the dot-com boom have given way to mundane-sounding technologies such as network-attached storage, which can save money and make systems more flexible, and application servers that can ease development and complexity. High on the wish lists of many customers is "application integration" products that can bring together disparate technologies that were purchased in headier, if not reckless, times.
"We're not going to be in the total can't-spend-a-dime mode like we were in 2002," said Jay Williams, chief technology officer, The Concours Group, a services firm. "Even those that are trying to put off spending will spend a little more to maintain infrastructure."
Still, even where these sensible products are concerned, spending levels will be tied to volatile economic factors such as a war with Iraq, corporate scandals and stock market turbulence. Forrester Research estimates that a 4.5 percent surge in gross domestic product will be needed to boost tech spending, a rate that the GDP isn't expected to approach in 2003.
Getting tech in sync
To gain the most from IT, companies must
align people, processes and technology.
No longer viewed as an optional luxury, technology represents more than a third of business capital spending, up from about 20 percent in 1980, according to Economy.com. That fact means tech spending will eventually mirror other cyclical parts of the economy, which explains why IT budgets are monitored as fiscal barometers well beyond the industry itself.
According to interviews by CNET News.com with chief information and technology officers, here are some of the technologies likely to top their shopping lists in the next 12 months:
Technology officers are swimming in software packages that were supposed to revolutionize the business but fell short. To make matters worse, all of these alleged "best of breed" applications are bred not to work together.
Enter the applications integration players, many of whom fly under the radar, such as Webmethods, Vitria and SeeBeyond. Their goal is to cut the number of applications and make the remaining technologies work better together.
In addition, companies are looking to Web services to help them with integration, but they are being careful not to buy into the hype that has surrounded this technology. Technology officers said they are looking not only to integrate applications internally, but also to work with partners, suppliers and customers.
The appeal of applications integration is changing the game for the software industry as a whole because customers are not willing to launch costly projects for customer relationship management (CRM) or enterprise resource planning (ERP) until they reduce the number of applications and integrate systems better.
Two large companies, Krispy Kreme and furniture maker Steelcase, are planning CRM and ERP projects respectively, but the goal is to cut the number of applications, simplify and ditch systems dating back to the 1960s.
Krispy Kreme CIO Frank Hood said the company is looking for an ERP system that will help it manage its sprawling business, which manufactures everything from the machines used to make its doughnuts to the batter used at franchises. "We need a more robust system," Hood said.
Making disparate software systems play nice is also causing customers to insist on open standards, which ease the development and interoperability of technologies from different manufacturers.
"If you're an infrastructure player and don't buy into the WS-I group, don't even show up--we won't do business with you," Merrill Lynch CTO John McKinley said in reference to the Web Services Interoperability Organization, a standards group led by Microsoft and IBM to make sure competing Web services software can communicate. "We're getting more draconian about getting people to converge to standards we care about."
An increasing amount of money is going to Linux projects, but technology officers remain wary of betting their budgets on the open-source operating system. Linux is the best-known example of open-source software, which has grown in popularity as a low-cost alternative to desktop and server products from Microsoft, Sun Microsystems and other large manufacturers.
However, some customers aren't convinced that open source is superior to proprietary systems or is as secure, and many don't think the expense of changing systems is worth the effort. The most serious concern about Linux is not the price--it's free--but the support it takes to keep up with changes.
"Experimenting is the key word for Linux," said Pat Cicala, principal of consulting firm Cicala & Associates. "It doesn't have the maturity, and that skittishness alone will limit it."
Most technology officers are using Linux for low-level functions such as e-mail or serving Web pages. A recent Goldman Sachs survey noted that Linux "clearly has a toehold in the enterprise, adoption looks to be slow and steady as opposed to explosive."
Storage is a customer's dream when budgets are tight. Because of falling prices and a surplus of hardware, companies can load up on storage at bargain-basement prices.
The result has been a rise in the number of new projects using network-attached storage, equipment that can be plugged into corporate networks as needed to help ease data bottlenecks for e-mail and Web systems.
New storage projects are in the works at Krispy Kreme and advertising giant Ogilvy & Mather, which constantly needs to move high-resolution documents around the globe. "Our storage needs are doubling and tripling every year," Ogilvy CIO Atefeh Riazi said.
Although storage companies are locked in a price war, spending for their products is still expected to rise. And if the economy recovers, storage needs are likely to increase quickly.
A few years ago, voice-over-IP technology was a killer app in training, touted for its ability to cut the cost of long-distance telephone charges and replace expensive and unreliable business telephone systems. But a lack of standards and poor signal quality slowed the spread of the Internet protocol communication.
Now, it may be coming of age in today's cost-conscious environment. Technology officers interviewed by News.com were enamored with voice-over-IP as a way to save on their phone bills. CIOs said voice-over-IP spending is expected to increase in 2003 as long as they are moving offices or opening new outposts abroad.
"We opened a new call center, and there will be new IP phones for them," said Chris McMahan, CIO of Wireless Retail, a fast-growing retailer of wireless phones.
At Ogilvy, voice-over-IP systems are being planned for 15 to 20 offices in Asia and Europe. Demand for the technology has not been as pressing in the United States because calling rates are relatively low, but that is slowly changing.
Like voice-over-IP, the popular wireless standard known as Wi-Fi is increasingly being seen as an effective way to cut bandwidth and cabling costs.
General Motors CTO
Tony Scott had used wireless technology for years in GM manufacturing plants, but he's now turning to Wi-Fi to cut costs. "In a factory with proprietary technology, a good business case can be made. With a move to Wi-Fi, we can use commodity pieces and industry standards for a lot less," he said.
Like other CIOs, however, Scott isn't sold on the use of Wi-Fi in the office. But if Steelcase CIO John Dean is any indication, other technology officers may be coming around--especially once more hardware is outfitted to work with Wi-Fi.
Steelcase, which makes incremental investments in wireless every year, installed Wi-Fi technologies at its headquarters in Grand Rapids, Mich. The company also uses Wi-Fi for employees that are mobile and work in teams.
The investment is paying off in three primary ways: Wi-Fi saves money on cabling, offers wiring flexibility and gives Steelcase insight on wireless worker productivity so it can design better furniture. "It started out with, 'Let's see how this works,' and then we shifted because there was a good business reason," Dean said.
Still, many technology officers are testing Wi-Fi networks but aren't ready to take the plunge, saying that other priorities will probably push those projects to the second half of 2003 and into 2004.
There is one technology that is worth noting for its absence from CIO wish lists: security. That's because security is not considered a shopping option; it is a requirement that must be in place before companies can even consider other projects.
"Security is an enabler to do other things," Schneider National's Matheys said. "You need protection--that's the cost of doing business."
The question for many companies is just how much they will be able to spend on that business. Even when times are good, industry veterans joke, you need a psychology degree to figure out when executives will feel confident enough to spend on technology
"I'm cautious about 2003, but my gut tells me the numbers are better than what companies are saying," Ogilvy CIO Raizi said. "But you don't know--customer behavior is irrational."