Preparing for the upturn, CIO sees IT budget increase for staff

After running IT on a shoestring, the CIO of a growing firm gets a 15% budget increase to support global expansion and prepare the business for the upturn.

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If the IT gurus who keep saying that companies need to prepare for the economic upturn happen to be looking for a poster company, they might want to visit Ugg sheepskin boot maker Deckers Outdoor Group Inc. That's where CIO Kurt Sowa just saw $500,000 added to his $3 million budget for new hires as he fields pleas from the business for more IT.

"I know a lot of people are scaling back," Sowa said. "We're trying to play it smart as a company so we come out of this recession period strong."

"I think everybody in the company recognizes that we have been lean for so long, it's time now to invest in IT," he said.

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Indeed, though many companies are slashing IT budgets this year, nearly a third of respondents to SearchCIO-Midmarket.com's IT spending survey late last year said their IT budgets had grown for 2009 despite the recession. Many are in growing companies like Deckers, the strapping Goleta, Calif., shoemaker where 2008 sales increased an astounding 53.6% to $689.4 million, most of that generated by its recession-resilient Ugg brand. The company also makes the Teva, Simple and Deckers brands and last year acquired Tsubo high-end casual footwear.

For Deckers, this year will bring much more modest sales growth, the company informed in its year-end earnings call, but no slowdown in its plans to expand overseas and to open more retail stores. (The market has since warned that the Ugg brand is reaching saturation in the U.S., sending shares down.)

Leveraging IT is critical to those growth plans, Sowa said. Finance wants to streamline its close process, he said. The shoe brands want better visibility into their sell-through and mechanisms for better forecasting. "They're seeing that IT can play a significant role in helping streamline the business processes and make life easier," he said.

And that's just what Sowa wants to hear, he said, having worked hard to position IT as a trusted partner.

Keeping it lean: IT as a percentage of revenue

Sowa, who joined Deckers in 2002 to fix a botched Oracle implementation, is used to running IT on a shoestring. He has kept the lights on at Deckers and plenty more with a budget equivalent to just 0.5% of revenue. That's well below the 1.5% industry standard for established wholesalers, he said, or the 2% to 3% for retailers -- but very much in keeping with the Deckers culture.

"We run lean. It's one of the reasons why earnings per share is so good," Sowa said, referring to a record 43.7% increase in earnings per share in 2008 over 2007.

But now IT is putting on some muscle. The company's Web operations, once run as a separate unit, have been folded into IT. IT's Oracle systems can provide "lots more scale" for the back-end financial and inventory processes than the Sage MAS 500 used by the e-commerce side, Sowa said, allowing the unit to focus on the metrics that matter, such as traffic to the site, conversion rates and Google analytics.

We're trying to play it smart as a company so we come out of this recession period strong.
Kurt Sowa
CIODeckers Outdoor Group Inc.
An Oracle upgrade this year, from version 11.5.9 to version 12, will help, he said.

A retail and distribution expansion overseas this year will also benefit from the upgrade. With a handful of stores in the U.S., Deckers recently opened two stores in London. Plans are under way for distribution in China and a store in Beijing under a joint venture forged in November.

"There is a whole raft of things that need to be done from a financial perspective -- setting up companies, having money move appropriately and getting the best tax benefits," Sowa said, adding that Oracle version 12 will provide much more functionality. "We are hoping to streamline the finance department tremendously over the next year."

Help wanted

In addition, a new "tech-savvy, process-oriented" vice president of supply chain is tapping IT to help give Deckers greater visibility into its supply chain, in particular its operations in China. The company subcontracts with factories in China, so "you can't just tell them to use our systems," Sowa said. As a result, he is helping set up partnerships with factories' internal operations and contractors to better integrate systems.

He is also looking into the possibility of using service-oriented architecture, a project facilitated by a trip overseas last year and many late nights on the phone. "When they are getting up in the morning, we have coffee to stay up late and talk to them," Sowa said.

To get it all done, he plans to add about five people to his staff of 16, including a requirements analyst for the financial area and a few more programmers to augment another requirements analyst and an ERP programmer who signed on in 2008.

Cost cutting still on the docket

IT budget increases are not the norm these days and are getting scarcer. And after the cautiously optimistic growth forecasts for IT spending and budgets issued by Gartner Inc., Forrester Research Inc. and others in the fall, analysts have issued a spate of downward revisions in the past few months.

Sowa said he understands that there are many routes to emerging from this recession as a strong company, including cutting head count and other costs. And despite his IT investments, he is still wringing every penny from technology, he said, pointing to a recent cell phone plan switch from T-Mobile to AT&T that saved the company a bundle and provided better international service to boot.

"The people in my organization understand that I am driving costs out of the organization where we can, [and those people] are empowered to take whatever steps they need to do that," Sowa said.

Whether the ambitious Deckers emerges from the recession as well as it weathered 2008 remains to be seen. Meantime, the company will announce first-quarter results on Thursday.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer

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