By Chris Murphy, InformationWeek
Sept. 18, 2007
In looking at how companies use business technology, it's tempting to see a single, thundering herd. Everyone's virtualizing servers, shipping jobs to India, and buying smartphones by the crate, right?
One of the best things about researching the InformationWeek 500 every year is the chance to pick apart the herd. Ask 500 innovative users of business technology how they get results, and the data sends a message: There's no single path to innovation.
One example: We asked companies to consider 21 technology initiatives--things like deploying Wi-Fi, implementing CRM software, and replacing legacy apps--and check those that have been most effective in improving their productivity over the past 12 months. Not one cracked 50%. The most-cited area this year was improving network bandwidth or performance, considered effective by 47% of InformationWeek 500 companies. Next was deploying business intelligence tools, cited by 43%. A third cited new types of collaboration software.
And those smartphones? Just 10% consider "issuing smartphones beyond a few top executives" a most-effective strategy of the past 12 months, No. 20 on a list of 21. Deploying Wi-Fi in company buildings (22%), implementing CRM or similar front-office apps (29%), and replacing homegrown/legacy applications with packaged apps (29%) fell in the middle of the pack.
Companies can't even agree on whom the CIO should report to: 46% say to the CEO or president, 24% to the CFO, 13% to the COO, and the rest scattered. The average company spends 2.8% of revenue on IT, down from the average of 3.5% of the past six years. Spending varies considerably by industry. At the high end, banks spend an average of 6.3% of revenue on IT, while construction and engineering companies spend an average of 0.7%.
Still, there are lots of interesting trends to pull out of the data. Watching the InformationWeek 500's use of technology over time offers clues about when an emerging technology has tipped over to mass adoption or which ones might be headed that way. There are insights into the global nature of IT and IT's role in supporting global business and some curious--even suspect--research data about information security at InformationWeek 500 companies. Here's some of what we gleaned this year.MORE GLOBAL THAN EVER
When we look back at the forces that reshaped business IT this decade, globalization will be among the most profound. It's evident among the InformationWeek 500 companies, where its importance continues to rise.
Every measure we took of globalization is up from recent years. The share of InformationWeek 500 companies doing offshore outsourcing is 66%, compared with 43% in 2004. The percentage of companies us-ing H-1B or L-1 visas to bring foreign workers into the United States hit 59% this year, compared with 43% three years ago. The biggest mover is offshore business process outsourcing: 40% of InformationWeek 500 companies do it, more than double the 17% in 2004. Twenty-four percent of companies are expanding their own IT operations in China, India, or some other part of Asia; that's a question we didn't think to ask in past years. (By the way, the use of outsourcing, offshoring, and H-1B workers isn't a factor in where a company ranks in the InformationWeek 500.)
IT teams are doing more to support their companies' global operations as well. Fifty-one percent exchange information with non-U.S. suppliers or partners in real time, up from 43% last year; 53% have a global supply chain. Seventy-five percent have staff or subsidiaries outside the United States, compared with 58% in 2004.
The only oddball number in this mix is that just 15% of companies cite "pursue new global opportunities" as a way they will innovate with technology this year, down from last year's 22%.
It's also worth a note of caution here: The "outsourcing shuffle" continues as well. Outsourcing in total is growing among InformationWeek 500 companies--36% say they've outsourced offshore in the past 12 months to improve efficiency, and 30% say they've done so domestically. But 20% have brought functions back in-house over the past 12 months for the same reason.
In fact, the shuffle is even more pronounced among the top 100 companies than in the following 400. While they're more likely to use offshore IT outsourcing--73%, compared with 64% for the following 400--they're also more likely to bring some of that offshore work back in-house for the sake of efficiency--23%, compared with 18%.TECHNOLOGIES TO WATCH
It's interesting to see which emerging technologies appear to be on the cusp--that is, technologies used by a healthy share of InformationWeek 500 companies but mostly in small deployments. Will they break through to mass adoption, stay a niche tool, or shrivel?
The clearest example is Ajax development tools: 45% of InformationWeek 500 companies use them in limited deployments, and just 9% in wide deployment. Grid computing is used by 38% of InformationWeek 500 companies in a limited fashion, by 14% widely.
Another technology to watch is radio frequency identification. Some 40% of InformationWeek 500 companies say they use RFID in limited deployments, just 12% in wide deployment. I was in the audience at a 2003 Retail Systems show in Chicago as Wal-Mart's then-CIO, Linda Dillman, announced the retailer's plan to dramatically accelerate adoption of RFID. Most people, including many of us at InformationWeek, thought RFID would've had a bigger impact on supply chain efficiency by now, especially in manufacturing and retail. Instead, it's still experimental for most companies, as they struggle to get a payoff beyond complying with the mandates of a few big customers--like Wal-Mart.
In contrast, service-oriented architecture appears on its way to blowing past emerging technology status to become mainstream IT strategy, justifying all the hype (well, at least some of it). Fifty percent of InformationWeek 500 companies say they have SOA in limited deployment, while 37% have it in wide deployment. Meanwhile, the Web services technologies generally used in implementing SOAs--applications using SOAP, UDDI, XML--have been widely adopted by 70% of companies and are in limited use by 24%.
Though the InformationWeek 500 is a proving ground for business technology, its members won't be mistaken for a bunch of wild-and-wooly experimenters. Forty-two percent discourage the use of unapproved consumer applications, for example, compared with 33% who encourage their use. Fifty-five percent use wikis, blogs, and social networking tools for internal communication, while just 27% do so with customers.
|Spending Trend (in $ millions)|
|Average company revenue||$12,471||$9,427||$9,652||$9,087||$9,776||$9,469||$12,031|
|Average IT dollars spent||$484||$320||$353||$334||$293||$304||$435|
|Average IT budget as % of revenue||3.88%|
Data: InformationWeek 500 surveys, 2001 - 2007
All InformationWeek 500 companies are technology innovators, but the top 100 deserve special recognition. Their ranking is based in part on particular projects they've accomplished, as ranked by our editors. But there are strategy differences that separate them as well.
Compared with the other 400 companies, the top 100 are less focused on streamlining business processes and cost-cutting and more focused on customer issues, such as getting new products out and engaging customers in new ways.
The top 100 are embracing Web technologies more aggressively. Three-quarters are integrating enterprise search tools into their Web sites or business applications, compared with 55% of the remaining 400. Nearly half of the top 100 are creating mashups, compared with 27% of the remaining 400.
The top 100 are much more likely to use new software models. Sixty-three percent of the top 100 use Web-only software, compared with 48% of the 400. And 81% use subscription-based software, compared with 64% of the other 400.
IT departments from the top 100 companies are nearly twice as likely to be developing products, processes, or services that are patented or trademarked (42%) than the remaining 400 (24%).
The top 100 also spend slightly more on IT as a percentage of annual revenue--3.0% compared with 2.6% for the rest of the pack. They devote a slightly larger portion of their IT budgets to new projects (43%) as opposed to maintenance, compared with 38% for the remaining 400. In addition, the top 100 are more likely than the other 400 to spend more on technology in 2007 than they did in 2006. In total, 62% of InformationWeek 500 companies expect to increase IT spending this year, 23% will match last year's spending, and 15% will spend less.
Breaking down the InformationWeek 500 by industry, financial companies dominate the top 100--20 are in banking/financial services and six are in insurance. That makes sense, given the size of those sectors and the degree to which their innovation depends on IT. Another information-intensive business well represented in the InformationWeek 500 is consulting and business services, with 11 companies, from law firms to IT outsourcers. But heavy industry has its place, too: 10 of the top 100 come from automotive and other manufacturing sectors.
Looking across all the data produced by our research, a few numbers are a bit puzzling, like the fact that only 16% cite globalization as a priority, despite global business rising on every other measure we asked about. And then there's the breakdown of spending on new projects vs. legacy ones--InformationWeek 500 companies as a whole say they spend 39% of their IT budgets on the new stuff and just 61% on maintenance. Those percentages have a whiff of wishful thinking--you'd expect something closer to 70% for that maintenance percentage, even among innovators.
One number jumped out as worth further examination: Only 2% of InformationWeek 500 companies say they've had a major data breach in the past year, and of those, only one out of five breaches surrendered customer data. Really, given all we hear about customer data problems? In the InformationWeek/ Accenture Global Information Security survey, about 18% of 1,101 U.S. companies said they had a breach that compromised information confidentiality the past year. It's probably reasonable that the vast majority of such compromises aren't "major." So while a close accounting likely would turn up a few more major data breaches under the rug, 2% seems plausible.
InformationWeek 500: How We Picked The List
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