by Elana Varon

Overview: The Resourceful 100

Aug 15, 20039 mins
Data Center

After stocks tumbled and earnings slid three years ago, CIOs took steps to rein in technology spending. They let people go, froze salaries, canceled projects and fired consultants. But those solutions can go only so far before cost-cutting begins to cannibalize essential operations, hurt quality and service levels, and stifle innovation. Tough times demand more than penny-pinching and bullet-biting; they require resourcefulness—creativity combined with a commitment to wring the most value from every IT dollar. From nearly 400 applications, we chose the 100 companies whose resourceful practices have best helped them preserve business-critical IT capabilities and, just as important, invest in new systems to drive efficiency and fuel growth.

“It’s really easy when you’re under cost pressure to adopt a don’t-do-anything, slash-and-burn sort of approach,” says Doug Busch, vice president and CIO of honoree Intel. But the resourceful approach is not just to cut costs but to become better by improving efficiency without compromising quality. Busch is systematically reducing IT costs while improving services. His goal is to cut his costs per unit of service in half, which allows the savings to fund new initiatives, such as providing wireless laptops to improve employee productivity.

This redistribution of funds carved out of fixed costs is a common theme among the Resourceful 100 honorees, which represent more than a dozen major private-sector industries, nonprofits, government agencies and the military. They range from small startups, such as fuel-cell maker Plug Power, to multinationals, such as Procter & Gamble. Other hallmarks of the Resourceful 100: They routinely cultivate creative ideas for system reuse. They build adaptable and flexible staffing models and make thoughtful sourcing choices. They continuously improve the quality of their software development and project management. They add rigor to their decision making and build win-win partnerships.

And they do it all with alacrity—80 percent of our honorees routinely get a resourceful idea off the drawing board in three months or less, according to “The CIO 100 Honoree Survey.” (Full results are online at Financial necessity may be the mother of cost-control invention, but in the most resourceful companies, managing IT staff and assets more effectively isn’t defined solely by business conditions. For our honorees, resourcefulness transcends the state of the economy. Resourcefulness is an ethos, a guiding principle for a corporate culture that continually questions whether there is still more value to be gained and more and ever smarter ways to invest precious assets. To sustain this principle in both bad times and good, 87 percent of our chosen companies rely on repeatable, often formalized processes to identify and implement resourceful ideas.

Organic Culture

Automotive parts supplier Delphi, a CIO 100 honoree, watched its margins dip in 2001, along with automobiles sales. Vice President and CIO Bette Walker, who was then running IT’s global business services and operations division, decided the conventional response—making across-the-board cuts to meet targets dictated by corporate budgeteers—would deepen sinking morale. Instead, she challenged her managers to scrutinize whether it would be cheaper to buy or lease PCs (leasing made sense for operations inMexico) and whether any legacy systems could be retired (thousands, it turned out). In two years, The Challenge, as the company now calls it, helped Delphi slice more than $200 million from its worldwide IT budget, in many cases exceeding the original mandated targets.

Since then, Walker’s approach to cost management has become a corporate standard and, she contends, it has become part of the corporate culture—changing the way the company thinks about its investments.

An in-depth look at how another Resourceful 100 company, Marriott International, created and perpetuated a resourceful culture begins on Page 38, with “The Keys to Marriott’s Success.”

Resourcefulness starts with a resolve to waste nothing. Nearly every one of our honorees has a process for systematically reusing its hardware and software assets instead of buying new equipment or writing new code—whether it hands down used PCs to employees who have light-duty computing needs when power users get an upgrade, or repurposes an e-commerce application for multiple suppliers. Intel avoided more than $24 million in hardware expenditures during a recent two-year period by collecting and redistributing within the company equipment that had outlived its original purpose. The company also reallocates software licenses when, for instance, one project is finished and the same application is needed for another job. For innovative reuse ideas from other honorees, see “D¿ New” on Page 61.

Strong Governance

The necessity for making the most of scant resources has prompted CIO 100 companies to install tough standards and procedures for justifying, approving and managing IT investments. The payoff is better leverage of existing assets, justification for major expenditures that would otherwise be shelved, and elimination of wasteful or unnecessary projects. In early 2002, when David L. Zeppieri became the first CIO with the federal Office of Justice Programs, investments were being made in a vacuum on a case-by-case basis. One of the first things he did was establish governance procedures that allowed the agency to prioritize investments. He also put in place project and portfolio management (as did three-quarters of the Resourceful 100) to ensure investments adhered to schedules and budgets and aligned with strategy. The procedures resulted in cancellation of redundant projects, postponement of others that weren’t fully fleshed out and the revival of a strategically important system that had languished because of performance problems. And a heavy hitter backed Zeppieri’s push for strong governance. “I had a letter from [Attorney General John Ashcroft] saying IT investment had to come from the CIO,” he says.

For more about how to use governance to increase resourcefulness, read “Deciding Factors” on Page 49.

At honoree Merrill Lynch, scrutiny of all IT investments has been intense, resulting in about $3 billion in savings during the past three years, according to Byron Vielehr, CTO for Merrill’s Global Private Client Group. The cuts, which include a $403 million reduction in telecommunications and IT consulting costs since 2002, were instrumental in the company’s ability to show a profit last spring. Nevertheless, Merrill has pressed ahead with a big spend—$1 billion for a wealth management workstation platform that will roll out this fall. “The real question we asked was not whether to do this, but how do we do the project more effectively—do we build it ourselves or do we outsource it?” Vielehr says. It was a lively debate inside Merrill, and the final choice was a hybrid model that relied partially on outside and internal development.

Vielehr expects Merrill will save tens of millions of dollars in operating costs during the life of the project, which encompasses financial data, investment portfolio management tools, CRM software, and other capabilities for the company’s financial advisers and customer service reps. For the most part, the technologies Merrill deploys are commodities. The company decided it wouldn’t be cost-effective to spend its internal resources on components that are available commercially.

When it comes to internal sourcing, many of the honorees take maximum advantage of the abilities of in-house staff through cross-training employees in strategic skills and tapping additional talent from elsewhere, inside or outside the organization. The Louisiana Office of Group Benefits, which administers health insurance for state employees, staffed the team that deployed a major update to its claims processing system primarily with end users. At honoree Butler Manufacturing, IT staff was cut by 25 percent since 2000. To make the remainder more resourceful, the construction materials maker cross-trained employees to deepen its technical bench and give more workers the expertise to spot opportunities for sharing applications.

Additional detail on how the Resourceful 100 manage and motivate constrained IT human resources can be found in “How to Create an Agile Workforce” on Page 64.

Partnership smarts

Finally, many resourceful companies look outside corporate boundaries to create more with less. Nearly all of the honorees found ways to get more from their contracts with application vendors, whether they simply drove a hard bargain or found a way, as did honoree Hershey Foods, to turn their special requirements into a marketable product for their software supplier. When Hershey needed to customize transportation management software from Manugistics, it worked with Manugistics to incorporate the new code into the vendor’s next upgrade. Hershey says it has saved hundreds of thousands of dollars through such arrangements. But it’s been hard for our Resourceful 100 to form partnerships with external customers, direct-materials suppliers or industry peers. Though the problems they want to solve may be common, competitive interests and vastly different business processes make getting together difficult. Yet such partnerships allow companies to share the burden of systems development and take advantage of each other’s expertise, among other benefits.

A handful of our honorees did pull off such partnerships. For example, Virginia Department of Corrections CIO Dee Pisciella was forced to work with the CIOs of other public safety agencies—which have always operated like independent companies—at the behest of a senior state official. As budgets tightened, the group quickly understood the benefits of teaming up. Because of the partnership, Pisciella developed a computer security training program for 13,000 public safety employees for less than the cost of hiring outside consultants for the task. In addition, the Department of Correctional Education now shares server space with the Department of Fire Programs; and instead of hiring consultants, Pisciella consults her peers when she needs independent verification and validation of projects valued at more than $1 million.

To find out more about how the Virginia Department of Corrections and three other organizations make partnerships work, read “Winning Combinations” on Page 79.

There are more ideas from resourceful honorees in the Trendlines and Emerging Technology sections. Starting on Page 18, find out how honorees tapped Chinese students for coding and used low-cost motivators for IT workers. And on Page 104, honoree Royster-Clark shows how to invest in leading-edge technologies on a shoestring.

The Resourceful 100 know that while these creative ideas and practices help the bottom line, they also pay dividends beyond the next quarterly report. Companies that are truly resourceful—that understand deeply the potential of their IT assets and expertise and have methods for tapping that potential—are well-positioned to seize new business opportunities. They will surpass competitors who don’t know their own strengths. They can do more than survive. They can thrive.