The cost of not investing in new technology.

• Author: Freund, Mark I.
• Position: Computer networking for management information systems - Includes related articles

At FEI's last Information Management Issues Conference, held in Chicago, attendees explored the emerging CFO/CIO alliance. One of the conference panelists, Mark Freund, CEO from the Interconnect Network Consulting Group, discussed how he believes executives can work together to implement strategic, not just tactical, solutions to information problems. His comments, as well as those of other contributors to the discussion, have been adapted into the following article.

Enzo Ferrari, father to one of the greatest automobile manufacturers of all time, was once asked the question: what single factor most separates Ferrari from all of its competition? He thought for a moment and replied, "Our competitors build race cars to help promote the sales of their production vehicles. At Ferrari, we build production vehicles so we can race."

I believe we must similarly invert our traditional perspectives toward information systems and their associated cost structures if we are to seriously participate in the increasingly competitive global markets of the 1990s. Specifically, we must ask: what technologies are truly strategic for success? How should we view their cost structures and their value? And, most important, how can these technologies be directly applied to our individual organizations, considering our existing information systems investments?

In the process of addressing these questions, note that most implementations of information technology have been initiated from a tactical perspective. We tend to use information systems to automate a process we already have in place.

However, to become competitive, we must deploy information systems technology as a strategic weapon. This technology, especially networking, is an enabler; it will allow you to fundamentally re-architect the process itself and effectively re-engineer the corporation.

For example, we automate a simple task or process in a tactical fashion when we give a power tool to a craftsman to use to put in screws, instead of doing it by hand. The result is that we may be able to increase that worker's production capacity from two screws a minute to five screws a minute. That represents a finite, constant increase in productivity. Therefore, it is important to note that this will never result in more than a linear return on investment over time.

Now let's consider automating this highly simplified manufacturing process from a strategic perspective. instead of applying automation to the individual task, we now allow it to be integrated into the entire business methodology. We now can rethink how we manufacture if we possess technology to integrate the sales, material/resource management, manufacturing, and accounting functions of the business. This application of technology enables us to re-engineer the corporation and will typically help us realize a non-linear and potentially exponential return on investment.

What have you been doing? Now you might ask yourselves, "Isn't this what we've been doing over the past 10 to 15 years or more? And, if we haven't been, what specific technology will enable us to get where we need to be? And at what cost?"

Historically, most information systems have been implemented by function: accounting systems in accounting, manufacturing systems in manufacturing, sales systems in sales, and so forth. And, because we have been applications driven (and properly so), it is not unusual to find that these functional systems are often optimized on a wide array of heterogeneous computing platforms, often from a nearly equal number of heterogeneous vendors.

The result is that our organizations tend to have a large investment in hierarchically oriented, host-based computer systems. But the real dollar...