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December 07, 2002 at 07:00 PM
Las Vegas
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.”
