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I n fo rrn ation Techn obgy

a:ndthe Bottom Line
A decadeago. critics questionedthe return on investt.ltent
from information
technology.But times have changed.I\ew lT nretricsconfirnrthe power of
infornrationtechnologyto help conrpaniesarttainbusiness objectivesancl profit goals.
From a look at how lT enables reengineeringand global expansionto afr Lrpdateon the
client/serverarchitectureand stand-outtechnologiessuch as electronicdata interchange,
this specialsectionexaminesthe growthof the lT industryand its inrpacton the bottomline.

FII\ANCIAL V{ORLD(FW) NO\EX\,tsER

6, L994
 s t t c I t l i l t n i l $ r r [$ t c i l 0 t

unprofitableand which businesspro-

cessesare inefficient, and they leverage
technology to identify new markets.
The IT Revolution
/ Finalll', IT distributed throughout a
company increases efficiencyby deliv-
ering information rvl.rercand when it's IJF.N I{ISTORI,\NSL()()K c:rn bc used to idcntifu, anticipate an(
nccclccl. [r:rckerr.l tn to rcclpturc catcr to tl-rcirnecds trncl rvants.
thc nrood rif thc I 990s. A s o r s a l r i z a t i o r r sd c t c r r n i n c t h r
A New Yardstick they'll no doubt rcfer to the dccadc's thcy'rc not cquil.lpcd to ciclivcr n'hrr
\ \ ' t r 5 1 r p - p l r5g,1\ .\ .'S K I ' l ' l l C Sl t,r r r l r o w first prcsidcntial elcctiorr, rvhcn thcir custourers denrand, thcv ttrr
can we tell if ani.'of thescs)'stcmsare Republicans talked about fanrill,r,al- inrvard t<l reevaluatc the u,ay thcy' d<
working?Tl'reansweris, you can...and ues and Democratstalked about the business. That proccss, known by tl.r
you can't. economy. Businesswatchers alrcady now nearlyubiquitousindustrybuz
Traditional ROI. which has its have a jump on things: They know w o r d , r e e n g i n e e r i nigs, a t m a n
roots in the nrauufacturing era, stipu- that valuesand economicsare the hall- companiesfollowedby a shift from
lates that an investment'sworth is proprietary,host-basedcom
directll' related to how much it can puting systemsto an open
save in labor or materials costs. By flexibleclient/server configu
definition, ROI doesn'taccommodate ration. That shift allow
what companies are hoping to m a n a g e r st o m o r e e a s i
achievewith information technology: deliver information to em
improved businessprocesses,market ployees who deal directl
and customer-servicesupport, and with customers.
compedriveness. Somecompaniespush th
To analyze IT expenditures and cliendservertechnology sev
outcomes,companiesare turning to a eral steps further to becom
new subscience. information eco- that most modern of bus
nomics.By using weightsto prioritize nesses:a global entiry tha
the intangiblebenefitsof IT projects, can deliver its servicesany
man:lgerscan measurethem alongside where on earth as easiiyas i
dollar figurcsof ROI. After laying out it were next door. Withou
corporateobjectivesand categoriesof yet reachingthe halfwa
risk and assigningweights to both, point of the 1990s, it'
proposedprojectsare scoredbasedon
how well ther"ll reach objectivesand When reengineering, companies should view
on what levelof risk thev carry.Then information technology as a tool to enable change,
a peer-revieu' cornmirteeanalvzeseach not as the reason for the change,
proposal to screenfor oversightsor
exaggerations. And finally,cornpanies rnrrrksof corporate Anrerica in the already clear to businesssoothsaye
'90:.
follow up to determinewhether Lrc'n- But rlre "r'llucs" corporations that thesethreeteners-reengineerin
efits really occurred. are aher aren't farnilr'-based,they're client/servercomputingand globaliza
Not only does information cco- custonrer-brrsed. tion-will form the cornerstone o
nomics help close the gap benveen Tcrdar"s customcrs want better business profit and loss for the
financial professionalsand informa- productsancl sen'iccs,deliveredsoon- remainderof the decade.
tion executives,it can have a p<-lsitive er, and trrilored more specificallyto
influenceon corporate decisionmak- their exacrand ever-changing business Reengineering
ing overall.The systemforcesall par- needs. Orgirnizations, whether they THE -REF.NGINEERINC- haS
TERM
ties to identify and agreeupon corpo- offer serviccsor products,now realize become a synonym for any kind o
rate objectives, weights, scores and that customerserviceis one of the few change,preferablyone that promise
results,in effect signing off on each ways they can maintain and increase to make the corporation more mone
project before it goes forward. And marketshare,particularlyafter they've For many CFOs,rcengineering mean
that'san intangiblebenefitthat nearly done ali the belt-tighteningpossible.If someoneis askingthem to spendlot
any corporate management team customersare the ticket to the bonom and lots of money on completelynew
u'ould vote for unanimously. line, then information tcchnology(IT) comDutersvstenls.
 In fact, business-processreengi
neering involves radically restructur-
ing a company's processesso that cus-
tomers rather than operations are the
focus of all businessactivity. Because
rethinking businessprocessesrequires
rethinking business policies them-
selves,analysts advise companiesto
view information technology as a tool
to help enact change rather than the
reason for the change.
Companies focus on processrather
)1 than on functional lines to ensure
,L every employee is adding value and
not simply routing or processing
goods or information. "Reengineering
means finding the cleanest,straightest
line between raw materials [or ser-
vices] and the customer,"says Allan
Frank, national partner in charge of
enabling technologiesat KPMG Peat
Marwick in Radnor, Pa. This often
means changing from a verrical struc-
ture, with individual departments
reporting to higher-upsall the way to
the top of the company, to a horizon- A successful global company uses technology to
tal configuration, where the flow of function as a vidual organization that trsendstt
information, goods or servicestakes expenise and data where and when they arc needed
precedence. The information travels; the people stay put'
The shift is usually achieved with
new, often open, networked computer reengineering efforts fail, full and One long-distance phone compan
systems that allow workers to share unequivocal top-management suP- for example, instituted a system tha
and route information across depart- port of reengineeringand clear com- lets workers perform ad hoc analys
t' ments. Frank suggestsfour wavs IT i munication among the CEO, CFO on the usagepatterns of high-volum
.--r<q--------._
can assistoncetiilanagershave identi- i and CIO are essential.But if reengi- customers and then develop micro
targeted services to keep those cu
l:
$
E
fied their business-process-reengineer- neering tenets are faithfully followed,
il
mg goals: corporations can reduce cycle time, tomers in the fold. At U.S. Shoe,th
o provide anybody-to-anybody com- shrink costs,increasethe level of ser- apparel and footwear manufacture
t munications vice they provide to their customers a reengineering effort that update
:, antiquated point-of-sale and me
f
o offer accessto sharedinformation and, ultimately, boost their profit
ir chandising systems gave the firm
i. o allow the firm to locate functions margins and overall profitabiliry.
where neededin the organization Productiviry is high on most man- much more timely and specif
r let workers capture information at agers'listsof reasonsto reengineer;by insight into what customers we
lts source. ensuring that every employee is buying--down to size and color-as
addingvaluerrsefficientlyas possible well as which retailers neededmo
Reaping Reengineering's to the overrrllbusinesstasks,produc- products and when.
Rewards rivity can soAr, tr:rnslating into Staying competitive in a changi
v HAT Do SUCHLOFTYbusirressand reducedcostsand higherprofits. business market requires balanci
systems goals provide to corpora- A successfullyreengineeredfirm is the need for increased customer se
tions? Plenry,say reengineeringadvo- faster and more flexible in respond- vice and value-added service again
cates, if carried out properly. Since ing to market initiatives and oppornr- costs of payroll, inventory and othe
even Michael Hammer, co-author of nities, leverages information more operations; both sidesofthe equatio
Reengineering the Corporation, has effectively and usesinformation tech- can improve with an lFbased reeng
concededthat nearly two-thirds of all nology to pinpoint specific markets. neering effort. Rather than operatin
 $ ? t c I t r 0 i l 1 i l $ t f ftit i l t 0 t

as separate fiefdoms, finance, manu- (although mainframes can act in this , the horizon are new applications an
facturing, marketing and inventory capacity)----costper MIPS is cheapeq 1 application-development tools tha
work with the same body of informa- maintenance is easier and hardware I can suppoft very large implement
/ tion. Sharing information not only and software upgrade costs are lower. i tions, as opposed to the small pilo
i speedsthe process,it improves accu- In addition, client/server is an open i projects that have dominated corpo
rrcy by reducing or altogetherelimi- system, so companies freed from the i rate client/serverthus far. Applicatio
natingthe numberof timesdata must constraintsof the one-computer/onc-I innovationis alsoexpectedto broade
bc rekeyed. vendor syndrome can shop for the i significantll'as s<lhu,arcbccomcsirb
Reengineering often brings into best price from among severalretail- I to efficiently handle a rvide range o
cxistenccinterdisciplinaryteams that ers,expandtheir systemsas they wish i data types, including free-fornt tcx
allolv a corporation to have several and rest (relatively)assuredthey'll be audio, video and so on.
'With
areasof expertiseconcentratingon the able to accommodate future changes such bright, shiny credentia
same problem at once. Such hybrid in standards. why isn't every application a clien
teamscan provide checksand balances Cliendserveradds value to decision I serverapplication, and why isn't eve
that keep workers focused on overall making and supports the rype of a i IS managersingingits praises?Cost
businessgoals rather than on the goals search that would require $2,000 j a big facor, and complexiryis anothe
of their individual departments. worth of programming for a main- 1 Vhile analysts and CIOs genera
frame query rc_VCt nr""l. ."pt"i"t gree u'ith the industry assertiontha
The ClienUServer "Plus, there'sthe functional capabili- i cliendsen'ercomputing is lessexpe
Computing Architecture ry--{very human being has his whole i sive than mainframe computing, th
ATMANYCOMPANIES, reengineeringhas comDuterto himself. price tag for switc
come to mean the sheddingor sidelin- Thisgreatlyexpands ing from one syste
ClienUSerVer
ing of expensive,rigid maffiame pro- the thingsthat per- __--;l:_;:' -:' , to the other can l
provides the speed,
grams for client/server'sless e4pensive, sonis ablero do.,, ;;.;;;;nough
highly flexible computing pladorm. A il. ;;.p, flexibility and ," rt"iclient/ser
1993 survey of more than 400 CIOs, "r
theworkerempow- improved communi- - break-even pointca
conducted by Deloine 6c Touche's ered by clien/serv- cations workers need bemanyy."r,
"*"y
for somecompan
Information Technology Consulting er'sdistributedinfor-to beef up customer
Group, found that a mere27 percentof mationlies at the COntaCt fUnCtiOnS. And the relati
respondents'critical applicationswere heart of the architec- youth of the marke
running on client/server systems,but a ture's appeal. Networked systems means standards havent jelled ye
whopping 93 percent of respondents increase access to information by sofrware isn't bug-free and vendo
expected this figure to double in their bringing processing and data where aren't always L00 percent accura
corporations by 7995. Similarly,nearly they're needed in the organization with their information.
half of the 224 CIOs surveyedby CSC insteadof making workers petirion the "The technologyis relarivelyimma
Index Inc. listed client/server as the mainframe. Client/server provides the ture, and that's a big, big concern
most important emerging technology speed,flexibility and improved com- saysJohn Halloran, managingpartne
for 1.993. munications workers need to beef up at Nolan, Norton & Co., a Bosto
A simple description of the customer-contafi functions. By dis- basedIT consulting firm. "Companie
client/serverarchitecn:re--a computer tributing information and giving are being overhyped and underdeli
network in which client PCs or work- users relational databasesand other ered by the vendors, and IT is left t
stations running user-interface and tools to get at it, companies are often sort out the issueswithin the organ
other software are able to requestser- able tb realize a relatively quick zation." Often this situation resultsi
vices from a server that maintains return on their client/server invest- cost overruns, sometimesof dramat
databases,processesrequests and ment once end users, rather than a and unexpectedproportions. A rece
ensures data integriq'--doesn't begin team of programmers, begin query- survey of Nolan, Norton clien
to explain its nearly explosive impact ing, modeling and forecasting with revealed that 53 percent of respo
on corporate information systems. corporate data. In addition, internal dents found the cost of client/serv
Becauseclient/serversystemsrequire communications such as proiect- was gleater than they had expected.I
much smaller and less expensive related exchangesamong a group of toting up cliendservercosts, novic
machines-personal computers or workers increase dramatically with often forget to budget for such item
workstations rather than terminals, distributed systems. as wiring, routers, consultants, mid
and a local area network (LAN) file Despite the architecture's relative dleware and retraining for employee
server rather than a mainframe immaturiry its future looks bright. On which can sometimescost as much a
 In decidingwhich sys- merelyinternationalmeansan org
tems to move frorn u zation'sworldwide business unir
Client/Server Usage legacy system ro a integratedenoughto achievestra
C-onrpanies in all industriesexpeaed to dnmatically incmse client/server environ- alignment that delivers signif
the number o[ dient/seruerapplicationsin use this I'ear ment, managers should returns in economies of scale
identify which systems scope.
Financial Seryies represent the highest Information technology takes f
business value and are and center stagein this push for g
E-
Halft Can most in need of cli- al coordination."The sheervolum
Itr- ent/server's distributed timesyou needto communicatera
Banking,|rhrins benefits. CIOs should ets up multiple times," says T
provide and CFOs Choate, vice presidentand mana
Thtrsporlation
should demand to see director of [T at Anhur D. Littl
G- demonstrable added Cambridge,Mass. "IT lets you s
ln$nne
value. For example, IS up the rate of those interactions
0.
managers at sprint monize them and shortencorrunu
Retail
f Corp.'s Long Distance tions distances between rem
llEn
$
l;
Mardasturing
Division argued-cor-
rectly, ir turned out-
employees." Information techn
cirn function as a great equa
5
n. Energ, Oil & Gas that a move to a cli- Choatesa,vs."lt lets you call an a
I ent/server system for an applearoundthe world."
r9
Foody'Co6urer Mucls billing procedureswould Companies consolidate
ri
'',. allow customer-service domestic and internationaldata
g
Prblishint agents to answer in- ters, for example, to dramati
E- quiries or check the sta- reduce their communications c
Distribution rus of large accountsin Digital Equipment Corp., w
45 secondsinsteadof the maintains what's widely viewed a
o% 5% 1(}% ts% 2046 25% 30't 35%
24 hours required to largestprivate network in the worl
Percentage ot Applicatims Using Clieni/Sener
print and analyze infor- said to have reduced total [T c
Source: Deloine & Touche.1993 mation from a legacy between25 and 30 percent by co
system. idating a number of worldwide
Client/server vendors centers.
or more than all the hardware and and consultants advise companies to On a broaderlevel,successfug
software combined. start with a few applicationsto get al companiesuse technologyto f
"If your CIO tells you that rearchi- their feet wet, then selecttwo or three tion as a virrual organization
tecting all your systemsto client/server strategic but low-risk candidates for "sends" expertiseand data where
rvill save money, be skeptical. pilot projects. FinallS organizations when they are needed.The info
Everything I've seensuggeststhat the should develop a two-year transition tion travels; the people stay
total costs of client/server comput- plan during which they migrate appli- Remote communicationslinks a
ing-hardware, sofrware, conversion cations 10 or 20 at a time. To mini- companiesto stay extremely fle
of existing systems,development of mize programming costs, experts in changingmarketsby assembl
new systems,training, management- advise companiesto reuse whatever hoc "teams" of workers and reso
will be hieher than the cosrsof main- code they can, particularlyif the busi- for particular projectsrvithout ha
franre conrpuring,"says Charlcs B. ness-specific logic code from the lega- to relocateanyone.
V'ang, founclerancl(ltO of Compr,rrer cy systemwirs sound in the first place. As trade barrierscontinr"re to
AssociatesInrernrrrionallnc., in his rrnclcconomiescontinueto conv
br>ok,TechnoVisiott. The Global Gorporation rhe sanreelementsthat madecc)
One way to avoid or ar leasrmini- ONCEA COMPANY has reengineeredits nies in their localmarket
"vinners
mize problemsis to plan carefullyand businessprocesses for maximum effi- increasinglydeterminewho can c
implement slowly, experts and ven- ciency,most often by moving to a flex- peteon the world stage.Analysts
dors advise. The biggest mistake is ible client/servernetwork, itt primed managers agree that an lT:ins
rushing to migrate applications before to start competing head-on in the advantage on the home front
ardculating the anticipated payback much-touted global economy of the serve as a launching pad for wo
and determining the costs involved. 1.990s.Being truly global rather than wide market dominance.