Article

IT spending, value top agenda at AMR Conference

Anne McCrory, Editor

BOSTON -- Slight increases in IT spending, higher capabilities at offshore IT outsourcers and wringing more value -- not just dollars -- from the IT function -- were some of the themes Wednesday at AMR Research Inc.'s

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18th Annual Fall Executive Conference.

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Before an audience of 350 IT and vendor executives, AMR analysts and guest speakers drove home many of today's industry trends.

An increase in IT spending 

"Companies do have the capital to invest and have been amassing that capital over a period of time," said Tony Friscia, president and CEO of AMR. IT spending growth will be highest among small to midsized companies, he said, but still in the single digits.

Where will they spend it? AMR's research shows that companies plan to spend the most in four areas: infrastructure upgrades, customer facing initiatives, compliance and supply chain performance improvements, respectively.

Yet dollars spent and value realized do not increase in lockstep. Asked which technologies would create the most value, the audience put supply chain and customer-facing initiatives first, with votes of 46% and 41%, respectively. Infrastructure upgrades (7%) and compliance (6%) barely registered in comparison.

Improved offshore outsourcing services

Look for offshore outsourcing firms to continually increase their skill set and services offered, said management consultant and author John Hagel.

The most successful offshore companies will be those that take measures to attract and retain talent. These firms will rapidly grow their capabilities and, as time goes on, will be able to meet increasing company needs. For example, one offshore call center went from handling stored value cards to travelers checks to mutual funds. These transactions involved increasing complexity and required higher levels of skill -- all in a matter of 18 months, Hagel said.

'Unique' product offering in the SMB space

PeopleSoft Inc. will release ERP for the small and medium-sized business (SMB) market in early 2005 with EnterpriseOne, its product from its acquisition of J.D. Edwards, vice chairman Aneel Bhusri said. The software, which facilitates demand-driven manufacturing, is unique in the SMB space and 12-18 months ahead of the competition, he claimed.

A look at IT/business alignment

When Johnson Controls wanted to cut its product development cycle from three years to 18 months and achieve a 5% year-over-year productivity cost reduction, IT stepped up to the plate. It secured approval for a massive standardization effort on a single ERP system that reduced product design costs, enabled lean replenishment and helped the company track product change requests, so it could charge those costs back to the customer requesting them.

Susan Kampe, vice president and general manager of Global IT at Johnson Controls, said other parts of the company's initiative included collaboration tools like web conferencing, some offshore development and a push for a utility computing model with its technology partners. The company has 178 manufacturing sites, 6,000 engineers and five design centers.

The innovation era of IT

What does the future hold? Is it a portable device like the iPod, distributed to first year students at Duke University this year to hold their course schedule, lectures and more? Or is it NTT DoCoMo's FingerWhisper, a wristwatch phone where an incoming call makes your index finger vibrate, and you put your finger in your ear to hear a voice?

AMR's Bruce Richardson, senior vice president of research, explored the "innovation era" and the services-oriented enterprise that will enable it. Web services are still in their infancy -- 73% of organizations in an AMR study had fewer than five in operation -- but examples of high penetration do exist. Verizon, for example, has 100 Web services in use, Richardson said. According to the study, some 15% of organizations are spending $500,000 or more on Web services this year.


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