December 5, 2002

Strategic IT: Key to Profitability

The 2002 Intelligent Enterprise Dozen Executive Roundtable debates what makes business/IT synergy thrive

by David Stodder

The complex challenges presented by our current economic times are surely keeping CIOs and other IT executives up at night. The recession lingers on; budgets will stay tight through 2003. With IT expenditures under intense scrutiny, tough decisions must be made. Which assets will survive the cut? Where can IT squeeze out greater productivity and efficiency for less cost? And which systems and applications are so strategic to the company's competitive prowess that they must be protected, if not expanded?

Perhaps even more basic: Do CEOs, CFOs, and other chief business executives really understand what it means to say that a particular IT asset is "strategic?" In the summer of 2002, Intelligent Enterprise partnered with Ilog, a leading supplier of software components and member of the 2001 Intelligent Enterprise Dozen, to survey online readers about strategic IT trends. One interesting number, right off the top: 78 percent of CEOs surveyed believe that they understand the value of IT to their organizations. However, only 27 percent of CIOs and chief technology officers (CTOs) surveyed agreed with that statement.

The survey also told us that strategic IT applications and systems — those that have a direct impact on critical business processes, customer interactions, and intelligent planning, forecasting, and decision making — add up to the competitive advantage essential for reaching profitability goals through these tough times. Of survey respondents claiming that their companies put "high importance" on using data to improve decision-making, 94 percent indicated that their companies were profitable.

Now more than ever, CEOs and other chief business executives need to understand the importance of strategic IT to the pursuit of corporate profitability. But for that to happen, IT solution providers have to reestablish confidence in what they're selling — confidence shaken by the series of IT-driven bubbles and bursts that set the scene for many recent business and investment scandals. Perhaps more importantly, faced with such a steep and rapid descent into recession, all the IT brainpower in their enterprise applications couldn't help businesses see what was happening and adjust in a timely fashion.

The Dozen Speak

With these thoughts in mind, Intelligent Enterprise and Ilog worked together to convene an unprecedented gathering of executives from some of the premier IT solutions providers: that is, members of the 2002 Intelligent Enterprise Dozen. Every year, Intelligent Enterprise names 60 companies as the IT solution providers most influential in "enabling the intelligent enterprise." We draw a mere 12 out of that select group of companies to watch and name them "The Dozen."

Our thanks to Ilog for sensing the moment and cosponsoring this Executive Roundtable discussion, which was held Oct. 18 on top of the Bank of America Center in downtown San Francisco. The roundtable discussion featured top representatives from BEA Systems, Business Objects, Cognos, IBM, Informatica, Microsoft, PeopleSoft, SAP AG, and Unica. The panel was joined by Pierre Haren, chairman and CEO of Ilog, and myself as moderator.

Several participants noted a defining characteristic of strategic IT applications: They embody a sea change in focus from "data in" to "data out." Critical to making "data out" work, however, is a solid integration and data quality capability — so that CEOs and other business executives can have "faith in the numbers, faith in the analysis," in the words of PeopleSoft's Chuck Teller, general manager and vice president of Enterprise Performance Management. "Too many times, business executives get to the analysis and there's debate about the numbers," Teller said.

Data, application, and business process integration came up frequently during the discussion, with some lively debate over which is most critical to strategic business applications and what role federated architectures, centralized data warehouses, and finally Web services might play. BEA's CIO Rhonda Hocker offered an IT executive's perspective: "Fortunately, at BEA we've been able to put in place an architecture with standards: applications, portal services, and everything [else have] to plug into that. Our executives want to see the end-to-end process, and they want access to real time information. Common services are crucial, and that makes the architecture most important going forward."

Putting integration into an evolutionary context was Dennis Moore, senior vice president of Cross Applications at SAP Labs: "Where we're headed is away from putting in more infrastructure; integration is really the last stage of that phase. The next phase focuses on how to put things together to achieve clear business objectives like 'we need to cut inventory in half.' That means it's not about 'doing analytics' or 'doing integration,' but how IT can deliver an application that can help the company cut inventory in half."

Kevin Cavanaugh, vice president of Technology for Unica, offered up marketing as a clear area where IT and business leaders must work together to establish metrics and guide the implementation of sophisticated analytics to achieve specific business objectives. In marketing, Unica's specialty, desired results such as "customer net present value" are hard to measure and involve "bridging multiple analytical techniques to make it happen." In other words, the integration demand doesn't ever go away; it merely moves up a few notches and deeper into the user's intelligence requirements.

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Visibility: For the Masses?

Visibility 3 the "cornerstone of what we are trying to achieve" according to PeopleSoft's Teller - was a major topic. Being able to see further into business performance, market conditions, the supply chain, and the collaborative network of business partnerships is a primary strategic IT challenge. "The key is leverage," said Tom Rosamilia, vice president of Worldwide Data Management Development and general manager of IBM's Silicon Valley Lab. "Executives want real-time data. Five years ago, BI [business intelligence] was about 'let's look back and see how we did over the last five years.' Now, it's 'let's look at how we did an hour ago.'"

"The time dimension doesn't end at real time," said Don Campbell, vice president of Product Innovation and Technology at Cognos. "It goes into the future. The plan of an organization is really about the future: How can we leverage all of our knowledge moving forward? IT has traditionally been the custodian of historical information, so this is a change. Until now, the plan for the future has been in an executive's head, or on a spreadsheet somewhere and not tied into data. I think putting this all together is what makes IT strategic."

"BI is rising in importance because of the visibility imperative," observed Sanjay Poonen, Informatica's vice president of Worldwide Marketing. "But we need one version of the truth — the visibility sits on top of that. We have to make sure that underneath, there's a proper data infrastructure so that the CEO doesn't face inconsistencies." Poonen stirred up debate about the notion of "BI for the masses," which several vendors have adopted as a rallying cry. Is it realistic? Is it really what customers are looking for?

"The whole vision of 'BI for the masses' is to provide BI in a way that's relevant to the person using the data," said Stan Sorensen, director of Microsoft SQL Server Product Marketing. "Financial people use hundreds, if not thousands of spreadsheet cells. Your boss might only need to look at a single view that's refreshed on a timely basis. It isn't about rolling out the same application to everyone — it's about rolling out the right application to everyone."

Strategic IT applications often uncover new possibilities for automation, which helps to drive down the costs of doing business. However, as Bernard Liautaud, Business Objects chairman and CEO observed, "There's a big difference between an automated enterprise and an intelligent enterprise. You can have a very automated but dumb enterprise. What's important is the alignment between business automation and information flow. To me, that's where we'll see the most interesting developments happening."

This is just a snippet of what was a fascinating and timely discussion. Look for more coming soon to www.intelligententerprise.com

David Stodder [dstodder@cmp.com] is editorial director of Intelligent Enterprise.

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