Editorial from the June 2005 issue of Managing Automation

Tug-of-War

by Jeff Moad, MA Editorial Staff

Posted on Friday, November 03, 2006 3:10:08 PM                                     

After enduring several consecutive years of slow- or no-growth IT budgets, IT managers at manufacturing companies could perhaps be forgiven for believing that competition for limited IT resources is about as intense as it could get. But they're wrong. Pressure for a fresh, new wave of IT spending is growing, stimulated by a collection of forces ranging from regulatory compliance to globalization.

Not that IT budgets are being increased nearly enough to allow IT managers to meet all of those looming demands. Most manufacturing organizations continue to keep a tight lid on IT spending, a habit many acquired following the Y2K-inspired tech spending splurge of the late 1990s that was followed, painfully, by a manufacturing recession. While observers such as AMR Research Inc. (Boston) say IT budgets in 2005 are increasing by an average of 7.4%, many manufacturers are keeping the pressure on CIOs to suppress any budget increases.

SLUGGISH SPENDING

Managing Automation's latest IT spending survey, for example, shows 38% of manufacturing companies held IT spending flat this year, compared to 33% who said the same last year.

"Our IT spending has been flat to slightly down for the last seven to eight years," says Bill Lawson, CIO at diversified manufacturer Ametek Inc. (Paoli, PA). "We will always invest in IT ... but probably not at a rate that is significantly different than today."

With demand for new IT services poised to grow and the supply of IT resources continuing to increase moderately, if at all, you don't have to be Alan Greenspan to understand that something's got to give. IT managers at many manufacturing companies are concluding that, if they can't spend more on IT, they've got to spend smarter. Many are introducing new organizational structures and processes intended to help IT and line-of-business managers collaborate better, particularly when deciding where precious IT dollars are to be spent. Some are even turning to a new generation of software tools -- dubbed IT Resource Planning applications by some -- designed to help the IT organization better balance the supply of, and demand on, its resources. All are meant to better align where IT spends its dollars with the ever-changing priorities of the business.

"The battle for IT resources is intensifying," says Bill Swanton, vice president at AMR. "Sixty to 80% of most IT budgets are spent just keeping what's installed running; for all other possible expenditures, IT is competing with plants, equipment and other potential projects. As applications continue to touch more people in the company who want more functionality turned on, IT has to get a lot better at understanding and prioritizing all the demands it is facing."

BIG DEMAND

So what's driving increasing demands on IT resources? One major factor is globalization. As manufacturing companies continue to disperse production and supply networks more broadly around the world, many are beginning to realize they need consistent and consolidated processes and systems if they are to avoid global chaos. And that's leading many manufacturers to consider upgrading existing, and often aging, business and plant floor systems.

Take Dana Corp. (Toledo, OH), for example. The $9.1 billion maker of automotive parts now has 240 major facilities in 28 countries. Until recently, however, IT was run in a highly decentralized fashion. Each of the company's major divisions had its own CIO, and there was little if any standardization in terms of systems or business processes. But that changed last year when Dana brought in a new CIO from Pepsico Inc., Bruce Carver, who decided that, in the interest of improving efficiency, it was best to centralize management of the IT function, roll out consistent project management processes and standardize where possible on core enterprise applications. The company won't be able to standardize quickly on a single ERP system, for example, since it runs some very large plants and some that are quite small, says Sean Forrester, who has been installed in the newly created post of director of IT planning and governance. Still, says Forrester, the standardization effort will require a major investment.

Page : 1 2 3 4 5 6 7   ... NEXT