Editorial: November 2002

Sixty-five percent of the respondents to last month’s CIO Insight survey on cost management agreed with the statement that “the current cost management environment is temporary and will change as the economy improves.” That’s wishful thinking, we believe. Corporations of every stripe, burned by the excesses of the recent past, are unlikely to return to their free-spending ways even as the economy recovers.

With few signs of recovery heading into the end of the year, companies are continuing to cut costs. One area that’s getting increased scrutiny these days is vendor contracts. This month’s survey, on vendor relations, suggests there is room for improvement in how CIOs negotiate with their vendors and work with them day to day. Not enough companies are using proven negotiating techniques such as deploying consistent teams of negotiators and buying in tandem with other companies. And while most of our respondents say they are generally satisfied with their vendor relationships, there’s an underlying current of dissatisfaction: More than a third think vendors respond too slowly to requests, and a quarter aren’t getting the ROI they were expecting.

In these times, CIOs are also concerned about getting the best value for the money they spend on IT projects. This month’s Whiteboard offers a technique for valuing IT initiatives that borrows from the thinking of the numbers people over in the finance department. The goal is to look at IT like any other asset in which a company might invest, and to assess its effect on the value of the company as a whole. The numbers are a bit tricky to calculate, but it’s worth the effort for CIOs looking to understand how investment decisions will be made in the 21st century corporation.

In that vein, this month’s case study profiles General Electric Co.’s push toward real-time operations. Armed with new information technologies and a more sophisticated understanding of how they can be deployed to boost productivity, GE is moving to dramatically increase what they automate. The goal: to remove costs and delays from the time it takes to make, buy and sell products, enabling managers to react faster to shifts in demand. Real time is also the issue at the heart of this month’s Expert Voices, in which Christopher Meyer of CGE&Y’s Center for Business Innovation discusses such concepts as fast feedback loops for product development, but warns that speedier operations will require new ways to manage both people and machines for maximum returns.

Should companies loosen those purse strings as the economy improves? Yes, but wisely. Even in good times, fiscal discipline is a good thing: It forces companies to more closely align resources with strategy, frees up money for experimentation and boosts R&D budgets. All of that spells future growth, and that’s the key to long-term survival.

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