Staying the course technology decision making in turbulent times

Staying the course? Technology decision-making in turbulent times Sponsored by A report from the Economist Intelligence Unit Staying the course? Technology decision-making in turbulent times Contents Contents About the research Executive summary Introduction: A technology stress test Opportunity in adversity? How technology decisions are being made 10 Technology choices 14 Conclusion: Investing for the future 17 Appendix: Survey results 18 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times About the research S taying the course? Technology decision-making in turbulent times is an Economist Intelligence Unit white paper, sponsored by SAP BusinessObjects The Economist Intelligence Unit bears sole responsibility for the content of the report The Economist Intelligence Unit’s editorial team executed the survey, conducted the analysis and wrote the report The Þndings and views expressed here not necessarily reßect the views of the sponsor Our research drew on two main initiatives: ! We conducted a wide-ranging online survey in February and March 2009 A total of 267 executives took part from around the world ! To supplement the survey results, we also conducted in-depth interviews with senior executives and independent experts The author of this report was Kim Thomas and the editor was Denis McCauley Our sincere thanks go to the survey participants and interviewees for sharing their insights on this topic May 2009 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Executive summary I n the business world, no aspect of company operations will emerge unscathed from the toughest economic crisis in three generations But information technology (IT), and the hard-won inßuence that chief information ofÞcers (CIOs) and other leaders have gained for it, appears to be surviving the crisis with conÞdence largely intact in many if not most companies The reputations of technology and the IT function did not fare well following the previous downturn early in this decade Since then, technology has become Þrmly embedded in company processes, and chief executive ofÞcers (CEOs), chief Þnancial ofÞcers (CFOs) and boards have become convinced of the importance of IT to their businesses In the preceding crisis, overambitious technology investment was blamed for many corporate ills; in this one, business leaders appear to view technology as an important instrument in preparing their Þrms for recovery Such executive-suite conÞdence means that in many companies technology-led projects and IT budgets are enjoying greater protection than other categories of spending Continued improvement in CIO-CFO relationships is evidence of Þrms’ expectation that technology can help them to emerge stronger from the recession Relations between CIOs and CFOs have often been contentious, particularly when the budget knife is out However, nearly one-half of executives in an Economist Intelligence Unit survey conducted for this study maintain that co-ordination between the two has improved at their Þrms in the past year A majority of both CIOs and CFOs rate levels of trust, communication and understanding between the two as strong CFOs offer a rosier picture of the relationship than CIOs, but few in either group report a decline in the strength of their relationships Other key Þndings of the research include the following: ! CIOs are not losing their place at the table Where they have gained a voice in major business and technology decisions, CIOs’ positions are not being undermined as a result of the current economic crisis Very few survey respondents believe that the inßuence of CIOs in technology investment decisions will decline in their Þrm over the coming year A sizeable minority, meanwhile, expect the CIO’s involvement in high-level business strategy discussions to expand ! Opportunistic Þrms are receptive to renewed technology investment A large minority (44%) of the Þrms surveyed say that they will be “on the business offensive” in the coming year, looking for © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times acquisitions or openings to take market share from weakened rivals These Þrms are more likely than those adopting a “defensive” stance to consider selective new investment in technology, with the aim of improving their competitive positioning ahead of recovery Technology investment proposals will not enjoy an easy ride, however More executives are becoming involved in investment decisions, and the volume and detail of information required is increasing Higher rates of return are being demanded, and projects with shorter return periods are being favoured ! Most Þrms are averse to suspending existing technology projects There is a recognition among corporate leaders that the implementation of major technology projects that they have launched is important to their Þrms’ ability to survive the downturn Less than one-quarter of survey respondents believe that major existing IT-led initiatives should be suspended until business conditions improve Many believe that the crisis presents a good opportunity to drive through technology-led initiatives This does not mean that they will be embarking on entirely new initiatives, however Few executives, even at growth-oriented Þrms, believe that now is a good time to launch major new IT projects CFOs also show support for following through on existing investments, but it is unclear how often spending requests in such areas will stand up to competing investment priorities in the business ! The focus of investment continues to be on improving customer relationships Customer service will remain the priority area for IT investments during the coming year This is for good reason, as evidence mounts from several sectors that customer loyalty is eroding and customer churn is increasing Information management will also be prioritised, especially when it comes to projects designed to improve Þrms’ understanding of customer behaviour Maintaining technology investment when times are very tough is not without risks for companies But some risk-taking is necessary if they wish to emerge from the downturn in a strong position to grow The management at opportunistic Þrms are betting that technology will help to deliver the competitive edge they are seeking, and they are willing to keep investing to ensure this happens CIOs and the IT function will need to deliver Who took the survey? The Economist Intelligence Unit’s survey, conducted in February and March 2009, gathered the views of 267 executives on technology decision-making in their businesses The sample was senior: 45% of all respondents were C-level executives, and over one-half of these were CIOs or CFOs It was also global, with 34% of respondents based in Europe, 25% in the Asia-PaciÞc region and 24% in North America Over 20 different industries were represented in the survey, although the majority of respondents (63%) came from the technology, Þnancial services, and consumer goods and retail sectors More details of the survey sample and results can be found in the appendix © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Introduction: A technology stress test B usinesses, along with the rest of society, are enduring the severest economic crisis since the second world war Isolated reports of positive business results in the spring of 2009 suggest that the crisis may be easing, but the Economist Intelligence Unit considers a return to healthy growth in most world markets to be a distant prospect After contracting in 2009, the US and Japanese economies, for example, will narrowly manage to return to positive growth in 2010, but economic contraction will continue in the euro area Business leaders hold correspondingly sober hopes: a majority of executives surveyed for this report not expect to see recovery in their markets before the end of 2010 Real GDP growth (%, at market exchange rates) World North America Western Europe Transition economies Asia & Australasia Latin America Middle East & North Africa Sub-Saharan Africa Source: Economist Intelligence Unit, May 2009 IDC, Executive market watch, March 2009 The forecasts are in constant currency terms 2008 1.9 1.1 0.7 4.7 3.0 3.9 5.9 4.6 2009 -3.0 -2.9 -4.4 -4.1 -1.8 -3.2 1.0 -1.5 2010 1.2 1.0 -0.5 1.4 2.8 1.5 4.4 3.1 2011 2.4 1.4 1.1 3.5 3.9 3.4 4.9 4.9 2012 2.8 1.9 1.6 4.1 4.3 4.1 5.0 4.9 Companies around the globe have reacted to the falls in market demand and the drying up of credit in a predictable fashion: they have implemented redundancies and cuts in expenditure Scalpels are also being applied to technology spending Outlays on information technology (IT) contracted sharply in the last quarter of 2008, according to IDC, an analyst Þrm The latter’s current baseline scenario foresees further contraction of spending in 2009, averaging -1.8% globally for the year.1 IT departments have lost no small number of staff in the mass redundancies that have shaken the banking and other sectors over the past six months A look below the surface reveals silver linings to the technology cloud, however IT equipment, such as servers and personal computers, has suffered the sharpest cuts in business spending, according to IDC, while spending on services and software during the crisis has tended to be more stable © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Technology industry analyst Robin Bloor sees the fall of equipment spending as the result not just of poor market conditions but also as evidence of Þrms’ success in implementing new techniques, such as server “virtualisation” (a method of partitioning a single server computer so that it can the work of several), to improve the efÞciency of technology The companies in our survey—and particularly those with a stronger tendency to pursue opportunistic growth—have in fact been less inclined to cut spending on technology than that on other parts of their operations in the past year As we will discuss later, they are also more receptive to selective new investments in technology than in other areas of the business in the coming 12 months This may be seen as a measure of the success with which organisations have used technology to improve the way that they operate IT is now deeply woven into the fabric of most companies (although not yet everywhere in the world), underpinning processes in every part of the business In the past ten years senior business leaders—and not just chief information ofÞcers (CIOs)—have become convinced of the productivity beneÞts and competitive edge that technology can provide, and for this reason they are reluctant to suspend major technology-led initiatives Tough times nonetheless require tough decisions Cost containment will remain the dominant spirit of most senior management teams until the signs of recovery are clearer In this environment, far from all technology initiatives will survive the intensiÞed scrutiny of boards and chief Þnancial ofÞcers (CFOs) This report, based on a global survey of senior executives and in-depth interviews with CIOs, CFOs and other decision-makers in the retail, technology and Þnancial services sectors, explores how businesses are making technology decisions during the downturn Which initiatives are seen as most critical to Þrms’ renewed growth when the recovery comes? If cost containment is now paramount, is the CIO’s and the IT function’s hard-won role as a “strategic partner” in the business under threat? CIOs and other IT professionals are likely to Þnd our research Þndings on these and other issues mildly reassuring Every baseline scenario, however, has an alternative—usually gloomier—one to accompany it Should the economic crisis deepen and markets take far longer than expected to recover, no category of business investment will avoid the scalpel © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Key points # Most Þrms will be seeking just to survive over the coming year, but many will take an opportunistic approach to growth during the crisis # Growth-oriented companies are more receptive than others to considering renewed technology investment over the coming year # Many of these Þrms view the crisis as a good opportunity to drive through major technology-led initiatives in the business, although entirely new initiatives are likely to remain on hold Opportunity in adversity? B usiness leaders are wisely guarded in their expectations regarding market recovery, but many display an opportunistic spirit when it comes to their own Þrm’s approach to the economic crisis Just over one-half of our survey respondents expect their Þrms to remain “on the defensive” over the coming year, the dominant aim being to survive the crisis with minimal losses A large percentage (44%), however, state that management will be “on the offensive” when it comes to pursuing opportunities for business growth Whether this many will prove to be truly brave remains open to question, particularly if today’s “green shoots of recovery” prove illusory and the crisis deepens But the Þnding does suggest that far from all Þrms plan to remain hunkered down for the duration of the recession The opportunistic group of companies will seek growth mainly by seizing market share where customer churn is on the rise or where weak Þnances have put their rivals on the ropes Macy’s, a large US department-store chain, reßects this assertive attitude Sunil Verma, the Þrm’s vice-president of information technology, argues that the recession provides an opportunity for stronger companies to beneÞt “We deÞnitely have a sense that now is the time to position ourselves, to come out and grab market share that’s going to become available when our competitors go out of business.” Many Þrms in this group will also be on the lookout for merger and acquisition opportunities while they can obtain good valuations of targets’ worth In addition, some may move to launch new products or services or enter new geographic markets, although these Þgure less prominently among growth initiatives to be pursued while the crisis lasts If your firm will be “on the offensive” over the next 12 months when it comes to pursuing growth opportunities, which of the following best characterises the approach it is likely to take? Select up to two (Top responses; % respondents) Capture new market share from weaker rivals in current operating markets 50 Pursue new M&A opportunities to take advantage of good valuations 27 Expand into new product/service markets 26 Expand into new geographic markets 21 Accelerate R&D process to introduce new innovations to existing products 15 Source: Economist Intelligence Unit survey, March 2009 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times How willing are those Þrms that claim to be growth-oriented to spend in pursuit of such initiatives? Survey majorities in this group as well as the “defensive” group have been cutting costs in the business since the onset of the crisis A majority of the opportunistic Þrms say that they will be receptive to the idea of renewed investing over the coming year, however—more so than the rest of the survey sample This does not mean that they will be spending aggressively: most will invest with caution, and many will remain focused on cost reduction But consideration of any investment at all is a more positive stance than most Þrms have exhibited during the past year A good track record Technology’s positive impact in most parts of the business has helped convince management that technology-led projects should be protected where possible The IT function might once have been the obvious candidate to bear the brunt of cost-cutting in tough times This has changed Firms in our survey that were cutting costs throughout the business were asked to identify the operational areas where costs could be eliminated with the least impact on business performance over the next 12 months Only one-Þfth of respondents cite IT as such an area, whereas operations and production, procurement and sourcing, and marketing are viewed as more likely sources of fat that could be trimmed away without damage to business performance Why are IT budgets not suffering as much pain as other categories of spending in the business? One reason is that many Þrms have already achieved a good deal of success in recent years in cutting their operational IT spending through the implementation of efÞciency measures It is the success with which technology has impacted on other parts of the business, however—helping to cut costs, boost efÞciency and create new opportunities to reach customers, partners and suppliers—that has done more to convince management and boards that technology-led products should be protected where possible Executives at most Þrms in the survey are not inclined to suspend such projects Less than onequarter of respondents hold the view that their Þrms should halt major existing IT-led initiatives until Do you agree or disagree with the following statement: "We should suspend existing major IT-led initiatives until business conditions improve"? (% respondents) Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know/Not applicable Total 20 26 22 26 36 14 Financial services 37 13 Consumer goods & retailing 19 28 31 14 IT & telecoms 18 18 46 16 Source: Economist Intelligence Unit survey, March 2009 Do you agree or disagree with the following statement: "The economic crisis presents a good opportunity to drive through major IT-led initiatives"? (% respondents) Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know/Not applicable Total 35 27 22 71 Financial services 11 36 31 18 Consumer goods & retailing 31 28 28 IT & telecoms 36 27 20 71 Source: Economist Intelligence Unit survey, March 2009 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Share of respondents saying their approach to technology spending over the next 12 months is characterised by one of the following two statements: "Invest in areas advancing your competitive advantage" or "Invest only in areas providing a clear return on investment" (% respondents) Total 53 "Defensive" firms* 43 "Opportunistic" firms** 66 * Respondents expecting their firms to be "on the defensive" in terms of business growth ** Respondents expecting their firms to be "on the offensive" in terms of business growth Source: Economist Intelligence Unit survey, March 2009 business conditions improve Forty-three per cent of respondents (and fully one-half of those in the growth-oriented group) also believe that the crisis presents a good opportunity to drive through major technology-led initiatives—a higher percentage than those who think the opposite This reßects a recognition that following through on existing technology-led initiatives is important to Þrms’ ability to survive the downturn Macy’s, for example, is embarking on a major cost-cutting initiative that will involve laying off 7,000 people across the company Mr Verma, however, reports that his technology budget has increased this year, because the business did not want to cancel certain projects that had already been approved This is, he believes, because IT is recognised as a “strategic partner” in the business It may be no surprise that the more growth-oriented of the surveyed Þrms are more receptive than others to renewed technology investment This should not be construed as an eagerness to embark on entirely new initiatives during the economic crisis: the largest proportion of executives—from growthoriented and defensive Þrms alike—believe that now is not the time to pursue major new technology investments The opportunistic group, however, seems to be betting that driving through technologyled projects and increasing IT investment—at least selectively—in tough times will pay off in the form of better competitive positioning come the recovery Mahendra Negi, CFO of Trend Micro, a Japan-based provider of content (or information) security services, explains his Þrm’s approach to technology spending during these tough times: “When everyone can spend, it’s hard to differentiate We are in the position where we have the cashßow to make investments If we can that, and our competitors are unable to, it can provide us with the necessary differentiation.” Mr Negi is not alone among Þnance executives in holding this view Judging by the survey results, CFOs are more positive about the outlook for technology investment in their Þrms over the next year than for investment in the business overall CFOs are more upbeat on near-term technology investment than are CIOs It is open to question how often technology investments will retain the support of CFOs when other urgent business priorities are pressing These relatively positive CFO views on investment are nonetheless reßective of executive-suite hopes that technology will help Þrms to weather the crisis and prepare for recovery © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times If you answered "substantially" or "somewhat" to the previous question, how you expect the yardsticks to change? Select up to two (Top responses; % respondents) Financial services Consumer goods & Retailing IT & Technology & Telecoms Periods for achieving ROI will be shorter 28 31 Total 34 31 Key performance indicators will be defined more tightly 34 39 29 32 Required rates of return on investment will be higher 23 39 31 30 Source: Economist Intelligence Unit survey, March 2009 “Our expectations for ROI [return on investment] have changed,” conÞrms Mr Floeck of Nuance “Our focus is on getting a positive ROI measured in months, not years.” It is a similar story at Groupama, says Mr Eskenazi “We’ve Þne-tuned our key performance indicators over the last Þve years The only change for us this year is that we will probably not a long-term project with an ROI in three to Þve years; we’re looking at projects that have much shorter periods of return.” Businesses are recognising, says Royce Bell, CEO of Accenture Information Management Services, that they need to respond more rapidly to changing economic circumstances This requires them not simply to aim at faster returns on investment, but also to be able to drop projects quickly if necessary: “Instead of saying ‘I now need to implement this project, and it will take 18 months’, they are trying to implement it in a more agile fashion: ‘We’ll the Þrst three months, see where we are and then see if it still makes sense.’ ” 13 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Key points # Customer service will remain a priority area for IT investments over the coming year, particularly as customer disloyalty and churn increase # Many Þrms will prioritise spending on information-management initiatives, to continue improving their understanding of customer behaviour # Within IT, server-virtualisation initiatives will be pursued, as these promise to deliver early cost savings, while projects with longer-term returns (such as services-oriented architecture, or SOA) may be delayed Technology choices G Rising customer churn means that retention of existing customers will likely take priority over acquisition of new ones over the next year iven tighter budgets, greater scrutiny and more demanding measures of success, what types of technology choices are Þrms making? As suggested, many Þrms are putting off longer-term IT projects where it is tougher to demonstrate an early beneÞt to the business Groupama, for example, has decided to decelerate the transition to SOA Although SOA will provide business beneÞts, says Mr Eskenazi, it does not offer an immediate ROI Projects going forward for his Þrm include the development of an extranet to improve communication with brokers, and connectivity to aggregator sites that provide comparative insurance information to customers Customer service will remain a priority area for IT investments over the coming year, for a good reason: companies can ill afford to lose customers in a downturn As Mr Negi of Trend Micro argues, “Acquiring customers is always expensive If you lose your customers, it’s very expensive to replace them.” This being the case, companies will probably need to be ready to spend more: Þrms in many sectors, and especially retail and consumer goods, report rising rates of customer churn as consumers and businesses seek lower prices more aggressively For this reason, the acquisition of new customers will probably take a back seat to customer retention over the coming year Says Mr Bell: “People have realised that the cost of customer acquisition is huge, and the people you acquire tend not to be loyal anyway So quite a lot of customer-segmentation analysis is devoted to determining which customers are more important and which to spend money on.” Reduced customer loyalty may be one consequence of the recession that persists well after markets recover Mr Bell maintains, however, that companies’ focus will eventually have to return to the acquisition of new customers For the moment, he believes, Þrms are not looking that far ahead; the priority for most businesses is to emerge from the recession leaner and more agile In your view, IT-led initiatives in which of the following areas should enjoy the highest priority over the next 12 months? (% respondents) Financial services Consumer goods & retailing IT & telecoms Customer service 55 25 42 Total 36 Information management (the flow and quality of management and other business information) 20 61 33 34 Supply-chain efficiency 13 50 24 30 Source: Economist Intelligence Unit survey, March 2009 14 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times In which of the following areas would better information and analysis most help you to make sound decisions during the next 12 months? Select up to two (Top responses; % respondents) "Defensive" firms* "Opportunistic" firms** Customer behaviour/preferences 55 48 25 42 36 Total 42 Competitor activity 20 61 33 31 33 32 Pricing trends in your markets 13 36 50 24 27 31 Financial performance 27 33 * Respondents expecting their firms to be "on the defensive" in terms of business growth ** Respondents expecting their firms to be "on the offensive" in terms of business growth 30 Source: Economist Intelligence Unit survey, March 2009 Partly for this reason, a large number of Þrms will also give priority to investment in improving the quality and ßow of information When asked where better information and analysis will help them most in the coming year, the largest number of survey respondents (42%) say that achieving a deeper understanding of customer behaviour will be their foremost objective Better information is needed in more areas than this, however The past two years have made it clear that Þrms in many industries—not just Þnancial services—have made some extremely poor decisions, owing to factors such as inadequate due diligence in acquisitions, overexposure to weak suppliers or even a poor appreciation of their own Þnancial situation When it comes to getting better information, the growth-oriented Þrms in our survey place emphasis on improved visibility and analysis of Þnancial Improving customer service: routine but vital Since the Þnancial crisis began, Mahendra Negi, CFO of Trend Micro, a global network-security services provider headquartered in the Japanese capital, Tokyo, has insisted on budget cuts in several departments, but with IT he has taken a different approach, allowing the CIO to put forward proposals and then approving those investments that provide a high return Customer service is one area where technology investments are being considered For example, whereas Mr Negi has decided that an upgrade to new desktop software can wait another year, problems with a call-centre operation in the Philippine capital, Manila, that caused a drop in satisfaction levels among customers resulted in the immediate implementation of an upgrade Enhancing their understanding of customer needs is also a priority for companies, particularly as buying behaviour undergoes change in a recession Retail and consumer-goods Þrms, which are at the sharp end of 15 interaction with consumers, place stronger emphasis than other Þrms in our survey on IT spending over the coming year to improve information management Nick Wharton, CFO of UK automotive-products retailer Halfords, believes that at times of economic pressure all businesses need to improve the quality of their information in order to make better, faster decisions and allow them to Þne tune the service they provide to customers “This is particularly important in retail,” he says “Halfords has over 10,000 products in its stores, so it is important to understand what promotions are working well when we put certain products together at certain price points In addition to further investment in our multi-channel offering, we will also invest more this year in improving key management information.” “In recessions,” Mr Negi reminds us, “customer requirements change, because they are struggling through the same difÞculties we are experiencing Like us, they have to prioritise investments If a company doesn’t adapt to the changed requirements of its customers, the chances are that it will be disrupted by a competitor or new entrant.” © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times performance and competitor activity, as well as of customer behaviour Within the IT function itself, server virtualisation is a priority among several of the CIOs whom we interviewed, because of the quick returns achievable in terms of reducing data-centre operating costs Firms are also exploring the cost-efÞciency beneÞts of utilising “cloud computing”, a model whereby IT services are managed by external, web-based parties Although it has not yet been taken up widely, analyst Robin Bloor believes that Þrms will begin to appreciate the quick wins that cloud computing offers, if nothing else in terms of saving on operational costs 16 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision-making in turbulent times Conclusion: Investing for the future B usinesses understand the need to keep an eye on the long game: while trying to keep IT costs low in the short term, they also know that continued, selective investment will help them to stay ahead when the recession ends Major projects initiated before the downturn are, by and large, being driven through rather than halted, in recognition of the fact that they have longer-term value to the business New technology projects, however, are currently being considered only if they offer clear and early returns for the business It is a delicate balance Boards recognise that successful planning for the long term is likely to mean funding projects that have no immediate return The problem of how to square short-term cost-cutting with long-term investment is never an easy one to solve, and few of the Þrms surveyed or interviewed for this report appear yet to have done so The challenge is particularly difÞcult when, as Mr Bell puts it, markets are jittery and investors are generally in it for the short term only Some risk-taking investment is necessary, however, if companies want to emerge from the downturn ahead of the competition The management of opportunistic Þrms that are planning to be “on the offensive” during the coming year are conÞdent that IT will help to deliver the competitive edge they are seeking, and they are willing to maintain investment in major technology projects to ensure that this happens For CIOs and the IT function, this raises the stakes: the inßuence in the business that they have fought so hard to gain will be at risk if they not deliver 17 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times Appendix: Survey results In February-March 2009 the Economist Intelligence Unit conducted a survey of 267 executives of companies from around the world Our sincere thanks go to all those who took part Please note that not all answers add up to 100%, either because of rounding or because respondents were able to provide multiple answers to some questions By when you think conditions in your market(s) will have recovered fully from the downturn? How well-positioned is your company, compared to your main competitors, to weather the downturn? (% respondents) (% respondents) Mid-2009 Better 54 End of 2009 The same 38 Mid-2010 Worse 31 End of 2010 Don't know/Not applicable 26 2011 and beyond 27 Conditions will never fully recover to those prevailing before 2008 Don't know Thinking more generally about your business, you believe that your senior management team will approach the next 12 months primarily on the defensive or on the offensive, in terms of business growth? (% respondents) On the defensive (ie, simply surviving the crisis with minimal business losses) 51 On the offensive (ie, seeking new M&A opportunities, or capturing new market share) 44 Don’t know If you selected “On the offensive” in the previous question, which of the following best characterises the approach your firm will likely take over the next 12 months? Select up to two Which of the following best characterises your company's approach to spending in the business overall since the onset of the financial crisis? (% respondents) (% respondents) Cut costs across the board Capture new market share from weaker rivals in current operating markets 50 29 Cut spending selectively Pursue new M&A opportunities to take advantage of good valuations 27 39 Hold spending constant Expand into new product/service markets 26 11 Invest in areas advancing your competitive advantage Expand into new geographic markets 21 10 Invest only in areas providing a clear return on investment Accelerate R&D process to introduce new innovations to existing products 15 Other, please specify Don't know/Not applicable Other, please specify Don’t know/Not applicable 18 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times Which of the following you expect will best characterise your company's approach to spending in the business overall over the next 12 months? Which of the following best characterises your company's approach to technology spending since the onset of the financial crisis? (% respondents) (% respondents) Cut costs across the board Cut costs across the board 13 14 Cut spending selectively Cut spending selectively 26 32 Hold spending constant Hold spending constant 10 22 Invest in areas advancing your competitive advantage Invest in areas advancing your competitive advantage 27 Invest only in areas providing a clear return on investment 15 Invest only in areas providing a clear return on investment 21 14 Other, please specify Other, please specify Don’t know/Not applicable Don’t know/Not applicable 2 Which of the following you expect will best characterise your company's approach to technology spending over the next 12 months? If cost-cutting is a priority throughout the business, in which of the following parts of your organisation you think that costs can be reduced with the least impact on performance over the next 12 months? Select up to two (% respondents) (% respondents) Cut costs across the board Operations and production Cut spending selectively 33 Procurement/sourcing 20 Hold spending constant 31 Marketing 15 Invest in areas advancing your competitive advantage 25 27 IT 27 Finance Invest only in areas providing a clear return on investment 22 Other, please specify 16 Research & development Don’t know/Not applicable 16 Supply chain 11 Sales Customer service Other, please specify Don’t know/Not applicable Do you agree or disagree with the following statements about IT initiatives and investments? (% respondents) Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know/Not applicable Now is not the time to pursue major new technology investments 14 27 19 28 12 We should suspend existing major IT-led initiatives until business conditions improve 20 26 36 14 The economic crisis presents a good opportunity to drive through major IT-led initiatives 35 27 22 71 We should wait to see how our competition is investing in technology before deciding on our investments 19 23 33 27 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times While economic and market conditions remain difficult, what you think should be the primary objective of IT initiatives in your organisation over the next 12 months? (% respondents) Find new ways of reducing cost by streamlining processes 46 Improve information access to facilitate better decision making 19 Increase speed and agility 16 Build new channels of reaching customers (eg, web portals) 13 Improve security and minimise risk Other, please specify Don't know/Not applicable In your view, IT-led initiatives in which of the following areas should enjoy the highest priority over the next 12 months? Select up to two (% respondents) Customer service 36 Information management (the flow and quality of management and other business information) 34 Supply-chain efficiency 30 E-business (eg, online selling, supplier portals, etc) 16 Risk management 15 Business process outsourcing 11 Enterprise mobility 10 Customer segmentation 10 Compliance and governance Reducing carbon emissions Other, please specify Don’t know/Not applicable How has the time required to make decisions on technology investments changed over the past 12 months? How you expect the time required for decisions on technology investments to change over the next 12 months? (% respondents) (% respondents) It takes us longer to decide on an investment It will take us longer to decide on an investment 40 43 No change No change 45 We have accelerated the time it takes to decide on an investment 30 We will accelerate the time it takes to decide on an investment 11 Don’t know/Not applicable 20 21 Don’t know/Not applicable © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times If you responded above that it has taken/will take longer to decide on technology investments, what are the main reasons for this? Select up to two (% respondents) There is need for extra caution and scrutiny due to the economic conditions 44 More technology investments now require board-level discussion 20 There are more executives involved in the decision than previously 18 More technology investments now require input or approval from line-of-business managers The information required to make the decision is not available quickly enough The information required to make the decision is not of sufficient quality Other, please specify Don’t know/Not applicable 16 How would you assess the information currently at your disposal for making key decisions about investments in your part of the business? Please rate for each listed information attribute (% respondents) Very good Good Neither good nor poor Poor Very poor Don't know/Not applicable Sufficiency 10 56 26 Accuracy 52 26 12 Depth of analysis 41 28 19 Timeliness 42 33 19 In which of the following areas would better information and analysis most help you to make sound decisions during the next 12 months? Select up to two (% respondents) Customer behaviour/preferences 42 Competitor activity 32 Pricing trends in your markets 31 Financial performance 30 Input costs 20 Project status reporting 11 Supplier performance/health Performance/health of potential acquisition targets Compliance with regulatory requirements Other, please specify Don’t know/Not applicable 21 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times How you expect the involvement of different executives in decisions about business strategy will change over the next 12 months? (% respondents) Will increase Will remain the same Will decrease Don't know/Not applicable CEO 55 42 31 12 CIO/CTO 28 56 CFO/Finance director 53 40 IT director 15 63 18 Line-of-business heads 34 53 11 How you expect the involvement of different executives in decisions about technology investments will change over the next 12 months? (% respondents) Will increase Will remain the same Will decrease Don't know/Not applicable CEO 43 50 CIO/CTO 39 51 CFO/Finance director 52 42 IT director 33 55 Line-of-business heads 26 55 14 Do you agree or disagree with the following statements about the role of senior executives in technology decisions? (% respondents) Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know/Not applicable Co-ordination between the CIO and CFO has improved in the past 12 months 11 37 40 Almost all technology investments—not just major ones—must now be approved by the CFO 14 44 25 12 When it comes to cost-cutting decisions, the CFO should take the lead even when it comes to technology, and the CIO’s role should be to help implement these decisions 12 30 24 22 How would you assess different facets of the relationship between the CIO and CFO in your organisation? (% respondents) Very strong Strong Neither strong nor weak Weak Very weak Don't know/Not applicable Communication 11 47 26 71 25 71 13 7 Trust 12 47 Mutual understanding of each other’s key objectives 43 27 Agreement on the major objectives of the business 13 22 47 24 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times To what extent you believe the yardsticks by which your company measures the progress of technology investments will change over the next 12 months as a result of the economic crisis? (% respondents) Substantially 21 Somewhat 54 Not at all 18 Don’t know/Not applicable If you answered "substantially" or "somewhat" to the previous question, how you expect the yardsticks to change? Select up to two (% respondents) Periods for achieving ROI will be shorter 34 Key performance indicators will be defined more tightly 32 Required rates of return on investment will be higher 30 Frequency of progress reports will be higher 24 Project status reports will give greater prominence to business targets than before 20 Key performance indicators will be more numerous 17 The risks will be defined more clearly 13 Other, please specify Don’t know/Not applicable 20 Do you agree or disagree with the following statements about change in the monitoring of major technology and other investments and projects throughout the business since the onset of the financial and economic crisis? (% respondents) Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree Don't know/Not applicable Our information requirements prior to making an investment decision have become more demanding 18 64 13 31 The quality of information we receive about investments has kept pace with requirements since the onset of the crisis 41 39 14 1 We rely on technology to monitor, analyse and plan investments within my business, including investments in technology and other areas 23 46 29 © The Economist Intelligence Unit Limited 2009 14 Appendix Survey results Staying the course? Technology decision-making in turbulent times In which region are you personally based? What is your primary industry? (% respondents) (% respondents) Financial services 21 Western Europe 27 Asia-Pacific 25 North America 24 IT 15 Telecoms 10 Consumer goods Middle East and Africa 10 Eastern Europe Latin America Manufacturing Professional services Healthcare, pharmaceuticals and biotechnology Technology Retailing Chemicals What are your organisation's global annual revenues in US dollars? Construction and real estate (% respondents) Energy and natural resources Government/Public sector $500m or less 36 $500m to $1bn 10 $1bn to $5bn 18 $5bn to $10bn $10bn or more 27 Transportation, travel and tourism Agriculture and agribusiness Entertainment, media and publishing Education Logistics and distribution Automotive 24 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision-making in turbulent times Which of the following best describes your title? What are your main functional roles? Please choose no more than three functions (% respondents) (% respondents) Board member IT CEO 33 Finance CFO 32 12 Strategy and business development 12 General management CIO 31 President/Managing director 31 Marketing and sales Treasurer/Comptroller 21 Information and research Technology director 13 Operations and production Other C-level executive 11 Risk SVP/VP/Director 25 Customer service Head of Business Unit R&D Head of Department Supply-chain management Manager 13 Procurement Other Legal Human resources Other 25 © The Economist Intelligence Unit Limited 2009 Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper Cover image - © Gary S Chapman 2008/Getty Images LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com NEW YORK 111 West 57th Street New York NY 10019 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 1181/2 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com [...].. .Staying the course? Technology decision- making in turbulent times Key points # CIOs are not losing in uence over technology investment decisions as a result of the economic crisis # CIO-CFO relationships appear on the contrary to be getting stronger, or at least remaining stable # Investment decisions are taking longer, however, and the yardsticks of success are changing, with faster returns being... analyst Robin Bloor believes that Þrms will begin to appreciate the quick wins that cloud computing offers, if nothing else in terms of saving on operational costs 16 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent times Conclusion: Investing for the future B usinesses understand the need to keep an eye on the long game: while trying to keep... The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision- making in turbulent times Which of the following do you expect will best characterise your company's approach to spending in the business overall over the next 12 months? Which of the following best characterises your company's approach to technology spending since the onset of the financial crisis?... investment in major technology projects to ensure that this happens For CIOs and the IT function, this raises the stakes: the in uence in the business that they have fought so hard to gain will be at risk if they do not deliver 17 © The Economist Intelligence Unit Limited 2009 Appendix Survey results Staying the course? Technology decision- making in turbulent times Appendix: Survey results In February-March... sense.’ ” 13 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent times Key points # Customer service will remain a priority area for IT investments over the coming year, particularly as customer disloyalty and churn increase # Many Þrms will prioritise spending on information-management initiatives, to continue improving their understanding of customer... other’s key objectives 52 78 50 Agreement on the major objectives of the business 56 75 60 Source: Economist Intelligence Unit survey, March 2009 11 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent times No easy technology decisions at decentralised retailers Spar, a chain of convenience stores with its international headquarters in the Netherlands,... Our information requirements prior to making an investment decision have become more demanding 18 64 13 31 The quality of information we receive about investments has kept pace with requirements since the onset of the crisis 4 41 39 14 1 1 We rely on technology to monitor, analyse and plan investments within my business, including investments in technology and other areas 9 23 46 29 © The Economist Intelligence... that the in uence of CIOs in technology investment decisions will decrease in their Þrm over the coming year A sizeable minority (28%, and 33% of those from opportunistic Þrms), meanwhile, expect the CIO’s involvement in high-level business-strategy discussions to expand CFOs are not riding roughshod over CIOs in decisions on technology investment On the contrary, their relationships appear to be getting... Financial services Consumer goods & retailing IT & telecoms Customer service 55 25 42 Total 36 Information management (the flow and quality of management and other business information) 20 61 33 34 Supply-chain efficiency 13 50 24 30 Source: Economist Intelligence Unit survey, March 2009 14 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent times. .. prevailing clearly dictate the need for extra caution and scrutiny Many executives report that more technology investment decisions require board-level discussion than previously, and that there are more individuals involved in the discussions “Whereas in the past, I’d have been sitting around the table of the investment committee with the CFO and CEO, at that same board we now have the line-of-business ... Technology decision- making in turbulent times About the research S taying the course? Technology decision- making in turbulent times is an Economist Intelligence Unit white paper, sponsored by SAP BusinessObjects... of the survey sample and results can be found in the appendix © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent times Introduction: A technology. .. wins that cloud computing offers, if nothing else in terms of saving on operational costs 16 © The Economist Intelligence Unit Limited 2009 Staying the course? Technology decision- making in turbulent