When it comes to buying technology in the current languid economy, business customers are delaying purchases and demanding more value and return on investment, according to several speakers at the Comdex Fall 2002 technology exposition held here.
At an event that has traditionally focused on the latest and greatest technology innovations, the message was clear that business customers want to see a clear link between technology investments and their bottom lines–a sentiment that also seems to have taken hold in insurance and financial services.
In a pre-conference panel discussion, Joe Levy, founder of CIO magazine, asserted that in many cases it costs a company 10 times the purchase price of a software package to get it up and running. “Customers are sitting on their wallets,” he said. “The [technology] industry must respond.”
One major problem facing large organizations, he noted, is data fragmentation. “There are just too many databases,” he said. “The average Global 500 company has between 350 and 450 different customer databases. The interesting thing about it is none of them can talk to each other.”
As a result, he continued, “top management does not have a clue if they wanted to aggregate all the spending on a worldwide basis of some customer.”
To combat such problems, said Levy, companies are now being forced to make their internal systems collaborate. “The days of information silos are going to be at an end,” he declared. “Companies are going to go from 400 databases to one database or two databases. What this will enable us to do is to spend less, because every database has one or two [database administrators]. DBAs, last time I looked, make between $75,000 and $85,000.”
Levy added that if companies are going to invest in technology, people, growth, innovation or new products, “the one ingredient theyll need is profits.” While CIOs have traditionally been interested in “bleeding edge technology” or “the latest, greatest gizmo,” Levy insisted that corporate America is seeking “adequate technology.”
What that means to them, said Levy, “is unless you can demonstrate ROI or some reason why whatever youre thinking of doing and however much you want to spend is going to produce some tangible improvement in one of three lines–the top, middle or bottom line–the company isnt going to spend it.”
According to Levy, the reason companies spent more on technology in the recent past was “primarily fear.” He pointed out that during the Y2K era, “every major company had to buy new technology. We werent quite sure what would work and what wouldnt. We couldnt take the risk.” In the end, he noted–with no major meltdowns on Jan. 1, 2000–”IT worked,” thereby justifying the investment in technology.
Levy said there was also a point in the last five years where “every middle-aged CEO was scared about some 20-something making him or her or the company look foolish, because the Internet was going to obsolete everything else.”
Many said then that industries would suffer as people ordered everything they needed from Web sites, rather than traditional businesses. “That, in hindsight, was just lunacy,” he noted.
Today, Levy said, “Companies have to invest in technology, because that is the only leverage they have on productivity, and that is the bottom line. Dont sell technology short. I think we all have to have more confidence in asking for money to invest in our technology infrastructure to make it more efficient and effective.”
Another panelist–David McQueeney, vice president, Intellectual Property & Asset Commercialization for IBM Global Services, Armonk, N.Y.–affirmed todays customers are demanding more of their technology suppliers.
“Customers today are asking us for complete end-to-end solutions,” he said. “They are demanding more now. Customers who spent a lot on IT are asking us to help them create more value. Theyre asking us to help integrate some of the systems they bought before they werent connected together, and I cant visit any one of our customers without a very powerful discussion coming up about horizontal integration through the enterprise.”
McQueeney emphasized that basic level technology research is still a vital role for technology companies such as IBM. “Its still important to have faster transistors, denser chips, higher quality networks; thats a given,” he said.
“But now [customers are] asking us to try to innovate more in carrying more of the load for them of tying those integrated solutions vertically into a horizontal network, where we take more of the responsibility as an industry in creating business value,” he added.
In a keynote address the following day, Carly Fiorina, chairman and CEO of Palo Alto, Calif.-based Hewlett-Packard, also emphasized the importance to customers of adding value and ROI.
“What [customers] want is straight talk and practical solutions,” said Fiorina, adding that buyers are also seeking lower operating costs and lower acquisition costs, as well as “a tight link between business and IT systems.”
Lowering technology acquisition costs will be achieved through standards and modular design of hardware, she said. The goal, she noted, is to “make a deeply diverse technology landscape work and work better.”
In order to lower technology operating costs, she continued, “your entire infrastructure must be adaptive to fully capitalize on your investment.”
Finally, she noted, companies must invest in IT services “that fundamentally improve ROI.” She said “companies must see a clear link between technology investments and ROI.”
Fiorina was optimistic about the economy and the technology sector. “I am more confident than I have ever been,” she said. “Progress is not made by the cynics and doubters. The need [for technology] is stronger than it has ever been.”
She added that news of “the latest, greatest, exciting and new products” is not what customers need most. Instead, they need solutions that “make all the pieces youve already got work together.
“The real agenda in todays world is a customer agenda. It is not measured in how much it invades our lives, but in how much it supports how we live and work,” she said.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.