IT clamps down on research spending
- 15 June, 2003 22:00
Despite the economic downturn and layoffs at many of the big IT research firms, a recent online and telephone survey of more than 50 CIOs suggests that most user companies have yet to significantly cut back on their IT research spending. But they aren't buying market forecasts and technology prognostications. What users are willing to pay for in a tough economy is the proverbial fishing lesson -- highly specific, actionable advice and how-to information they can apply on an ongoing basis.
Russ Lambert, director of e-commerce at US$4 billion Wesco Distribution Inc. in Pittsburgh, spent part of his organization's annual $100,000 IT research budget on Cambridge, Mass.-based Giga Information Group Inc.
"The scope of their work was to benchmark our e-commerce site, then teach my Web marketing team how to benchmark the site. They just don't walk away [without training your staff] so you have to hire them again," Lambert said.
Bill Homa, CIO at Hannaford Bros. Co., a 115-store grocery chain based in Scarborough, Maine, wants feature-by-feature comparative product information.
Homa decided against cutting back on IT research for 2002 in December, when the economic downturn worked to push up Hannaford's acquisition of a new mainframe, several Unix servers plus new storage and networking gear. "Things that we had slated to buy in 2002 we bought in 2001 because we could get such a good price," Homa said. "Discounts were 10 percent to 20 percent above normal for year-end discounts. It was a great time to buy technology. We haven't cut back on our research because we still think it's very important."
What he needs most from his key research suppliers Gartner Inc. and Boston-based AMR Research Inc. is specific product-evaluation data.
But Hannaford's case is an anomaly, according to AMR Research CEO Tony Friscia. "In a recession, most people aren't buying anything new" in the areas of hardware or software, Friscia said.
So AMR is retooling its research offerings to include ROI analysis models and benchmarking tools to help users get the biggest bang from the hefty IT investments they have already made.
AMR also reduced its workforce by 10 percent in November, cutting 30 analysts and salespeople from its staff, which now totals 235 people (see chart). But Friscia said this hasn't negatively affected service to users, because the ratio of analysts to user clients remains the same.
"We grew our staff pretty aggressively in the beginning of 2001 on the assumption that we'd come in at revenue of $60 million-plus," he said.
As it turned out, AMR posted revenue of $48 million in fiscal 2001, up from $42 million in fiscal 2000 but well shy of its ambitious projection for last year. Meanwhile, the research firm's client base shrank from 1,060 to about 1,000.
Gartner, which has 650 analysts and about 11,000 clients, who spend an average of $84,000 per year at the firm, is focusing more on company-specific research and consulting, said Gartner CEO Michael Fleisher. Revenue for this part of the business is up 8 percent over last year, he added.
"Clients are looking for more consultative help and measurement services. These are very critical in a tough economy," Fleisher said.
So is staying ahead of top management, which seems to be relying even more heavily on technology to pull through the economic downturn, said Judy Zilka, an IT manager at The Andersons Inc., a $900 million agricultural products company in Maumee, Ohio.
That's one reason Anderson retained its flat-rate subscription to Gartner's Advisory Service. However, Andersons did reduce what it spends for additional users to tap into the research. This is because the cost of each added user soared from $500 in 2001 to $15,000 this year, Zilka said.
"The business people are reading the computer magazines and coming up with strategies that we need to apply technology to. It's difficult to stay ahead, but if you stay status quo with technology, you can't compete," she said. -- Computerworld US