In my column last October, I addressed the profile of the typical information technology (IT) organization based upon the findings of the ongoing IT benchmark study conducted by Hackett Benchmarking & Research, part of Answerthink. In the next two columns I will continue the discussion by looking outside the IT organization to the study's findings on the impact of technology in the business as a whole and how that frames the future challenges for IT leadership. In this column we will look at the facts; in the next one, we will study the implications for IT planning.
One fact is not in doubt IT is becoming more pervasive and mission critical every day. At the average company, the proportion of the workforce who are regular users of IT has grown from 53 percent to 70 percent in the last three years. For many companies, particularly in the service sector, the number is 100 percent. With the in- creasing ubiquity of IT, there is also greater visibility of its relative successes and failures. In a recent Conference Board Study, 53 percent of CEOs cited changing technology and the impact of the Internet as critical business issues. With increased visibility comes increased demand to maximize the return of technology investments, and it is in this area that the benchmarks provide some thought-provoking insights.
The last few years have seen a succession of new technologies, all of which promised to revolutionize business. Enterprise resource planning (ERP), client/server, data warehousing and the Internet have all promised major cost and productivity improvements. While it is clear that much of the productivity gains and economic growth of the last 10 years is attributable to technology, there is mounting evidence that the full potential has not been realized.
First, increased IT investment has not always reduced cost or increased productivity. For example, despite a 35 percent increase in the average IT cost to support an end user in the last three years, 55 percent of business analyst staff time is still spent collecting data rather than analyzing it. The picture is much the same in human resources. There has been a 40 percent increase in technology investment since 1998, yet human resource administrative costs have increased by 16 percent over the same period. In the area of online customer support where much investment has been focused, 78 percent of companies still take more than 24 hours to respond to an online query. The reality is that it is still quicker to drive to the store and stand in line at the customer service counter!
Second, the decade-long drive to implement technology-enabled best practices is only partially completed. Despite the hype surrounding Cisco's ability to close its books in one day, the average company still takes four to five days to complete what should be a routine task after 30 years of investment in financial accounting systems. Even Cisco's nimbleness in accounting was still not enough to prevent inventories from increasing fourfold in two years to $2.5 billion. One of the largest areas of IT investment in recent years has been in data warehousing and decision support systems to improve planning, forecasting and decision making; however, it was not enough to prevent 900 companies from issuing negative earnings pre-announcements during the fourth quarter of 2000.
Third, companies have barely had time to start deploying the latest tools and technologies before they are replaced or supplemented by the next wave. The result is that few companies have successfully completed deployment. For example, although 86 percent of companies have implemented some form of an ERP system, only 30 percent have fully deployed them and another third are still wrestling with multiple ERP platforms. The progress in customer relationship management (CRM) systems lags even further behind, with only nine percent of companies able to integrate records of both a customer's offline and online activities.
What conclusions should we draw from this data? Pessimists would find it easy to conclude that businesses have wasted billions of dollars in technology investment in recent years. Those optimists among us will conclude that there remains enormous potential to wring cost, productivity and service improvements from technology that can sustain profitable growth for years to come. The reality is that both points of view are true. There is no doubt that many technology investments have failed to realize the returns that were initially expected. Unrealistic expectations, poor project management and increased levels of complexity contributed to the shortfall. However, that has not been all negative. The experience gained and the infrastructure that has been built provide a robust platform for realization of significant benefits moving forward. For many companies, the challenge is to fully realize the benefits from past investments while continuing to leverage the promise of new technologies.
In my next column, I will address how leading companies are addressing this challenge and the assumptions they are building into their planning.
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