Intel supremo Andy Grove recently lambasted European IT managers for failing to evangelise their art forcefully enough in the boardroom. But exactly how do our IT strategies and opinions differ from those of our counterparts across the pond?
The Compass Computing Strategy Census is an attempt to answer that question. Carried out by the information systems department of the London School of Economics, the survey asked IT directors from companies in the US, UK, Germany and Scandinavia what has changed about business IT over the last three years.
The sample was a random selection of 5 per cent of the top 3,000 companies from these countries. The results show both the increasing importance of IT in late 1990s businesses and the extent to which US businesses are, indeed, leading the way.
Q What proportion of your company?s total costs is spent on all aspects of IT?
The survey shows that the average corporation has increased its spending on IT by almost a fifth in the last three years ? from 6 per cent of total spend in 1993 to 7 per cent.
This is three-and-a-half times more than for IT budgets commonly reported in the 1970s and early 1980s, and shatters many claims that companies are downsizing IT.
This may be a backlash against pressures to curb IT spending in the recession-hit early 1990s, and the resulting need to catch up on technology.
However, without doubt, the main cause is companies? increasing dependence on IT to allow the dispersal of their activities geographically and among alliances of contractors, partners and customers.
One IT director questioned for the survey states: ?The ?New Organisation? is a network of resources which needs remote planning, control, feedback and motivation. If you want to be that sort of company, you?ve got to accept that your IT spend will be an increasing proportion of the total budget.?
The finance sector leads the world in IT spend, with costs standing at 15 per cent of their total budget. Governments are the only other type of organisation to spend more than the 7 per cent average, laying out 9 per cent of their budget on IT.
Q What proportion of your company?s external communication relies on IT?
The most significant indication of growth in the effect of IT on corporate strategy is its influence on communications between a company, suppliers and customers.
This shows the strongest upward trend in the influence of IT over the last three years, moving 21 per cent to claim 57 per cent of all external communication. This opens the way to the popular ?partnerships and alliances? philosophy of modern business.
Another IT director says: ?Electronic commerce is more than a new way of communicating. Anyone, anywhere, anytime communication lifts the old restrictions confining business to centralised offices controlling do-it-all factories. Anyone can help you make your product, and any place will do as an ?office desk?. The only thing you can?t outsource is control. The person who has control in such organisations is the one who understands the computer network and owns the unifying system.?
The utility, finance and retail/distribution sectors are leading the way in embracing electronic commerce.
Q What proportion of your corporate strategy depends on IT?
IT seems to have taken over strategic planning in the boardroom, if you look at how much corporate strategy depends on it for its implementation. Worldwide, the overall claim is that 20 per cent more corporate strategy now depends on IT than it did three years ago.
A total of 60 per cent of all corporate operations now depend, to some extent, on IT systems. The US leads the way, confirming Intel chief Andy Grove?s recent assertion that Europe is lagging behind, with nearly two-thirds (64 per cent) of its operations being IT-based. German claims, at 49 per cent, are significantly less, but show a similar growth pattern during the three-year study.
The industries most dominated by IT are finance (75 per cent) and the retail/distribution sector (69 per cent). But with nearly all industries stating that more than half their corporate strategies need a vital IT component, questions must be asked about the role of the IT directors making these claims. Are they really members of the inner sanctum of senior directors sharing responsibility for business results?
One IT director questioned says: ?Soon after my appointment I had a confrontation with another board member. ?It?s not your job to tell me about issues that will affect my performance?, he said. He had no idea that I had any authority to talk about anything other than the wizardry of technology.?
Q What proportion of your software is represented by off-the-shelf packages?
The survey analyses shifts in IT organisation and methods. The world?s companies may well be giving up on programming. A total of 45 per cent of all software running on computers was bought as a package in 1996. This represents a shift of 15 per cent (half as much again) from the 30 per cent reported for 1993.
It is a clear indication that programming (and re-programming old systems which users no longer understand) is proving too difficult a job for business. Only governments, with a package proportion of 23 per cent, are bucking the trend.
Q What proportion of your in-house and contract staff?s time is spent using IT?
IT penetration is also measured as the increased use of computers. The survey shows that staff spend most of their time (an average of 61 per cent) in front of screens. The trend is most marked in the US, which reports an increase of 17 per cent since 1993, to a total of 67 per cent of their workforce?s time now spent using IT.
Q What proportion of your IT is operated in an open systems environment; and how much of your IT is outsourced?
Another important shift is towards open systems. A surprising number of companies claim they have made the move, with 39 per cent of all systems now running in an ?open? environment.
There is also a move towards outsourcing. People are beginning to accept that in-house staff are no longer the best source of up-to-date knowledge.
The realisation that facilities management can be done by a business ?partner?, rather than a ?preying? supplier, is shown by the swing towards outsourcing from 9 per cent to 16 per cent over the last three years.
Is there a contradiction between this trend to outsource and the shift reported earlier, to see IT as a fundamental plank of corporate strategy? One respondent says that to outsource such core activities is a ?dereliction of duty?.
Q What proportion of your IT is centrally operated and controlled?
The most interesting trend charts the relative fortunes of the centralisation and decentralisation protagonists. Historically, IT was entirely centralised; it cost too much to spread it around the company.
Users had no programming skills. By 1985, the cost of a computer had become so cheap that user department?s could afford them. And because of the availability of packaged software, the need for specialist implementation skills declined.
By the early 1990s, users controlled about 20 to 25 per cent of the average company?s IT spend. Further decentralisation came from client-server technology and powerful workstations and PCs.
However, warnings of disintegration and failed systems, followed by studies showing increased costs, would seem to suggest that decentralisation should be slowed down.
The survey results, showing a rise in centralisation of four points over the last three years to 78 per cent, indicate that the central IT department is beginning to claw back control.
As one IT director comments: ?At rock bottom, there is no such thing as a standalone system. They all need to talk to each other and to share information. For today?s ?virtual? organisation, which exists by virtue of the network, we can only be talking about a giant client-server system, with a mainframe as the server, and extremely thin clients. They can only be allowed to put on weight to the extent that they remain self-contained ? and if they have the money to indulge themselves.?
Compass is dedicated to helping enterprises increase profitability and improve quality through comparative analysis in all aspects of business.
In the field of IT, with more than 500 active clients worldwide, it delivers results for data centres, applications development, wide-area data and voice networks, client-sever computing and outsourced services.
The Compass Computing Strategy Census will be repeated this year to find out IT intentions up to the year 2000. For more information on Compass consultancy services, and about this survey, contact Robert Wilson on 01483 514500.
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