Three times a year, while conducting our benchmark surveys, we ask our readers how many sales channels they operate — and each time, their lists grow longer. No channel, it seems, is off-limits. This time, our respondents cite at least eight primary methods and several secondary avenues of interaction with customers. Web sites, direct mail, and printed catalogs steal the top three spots, but brick-and-mortar stores, direct-response TV and print ads, telemarketing, and field sales forces are also common.
The problem is that not everyone’s IT infrastructure is sophisticated enough to handle transactions among all these channels smoothly. Among systems integration technologies, the most prevalent are application servers, which 64% of our respondents have installed. Use of other types of integration systems is far less: Only about a fifth of the respondents (and slightly over a third of the $50 million-plus companies) deploy content management systems, legacy integration applications, portal servers, or supply chain software. Nearly a third (31.3%) of the respondents do not plan to invest in technologies such as wireless LANs or voice-over IP in the next 12 months. Among those that have installed or plan to buy new technologies, the preferred systems are Web services tools (28.5%), computer telephony integration (23.8%), wireless LANS (21.5%), and virtual private networking (21.5%).
HOME ALONE
In listing their top three integration concerns, our respondents place incompatible applications (61.2%), flawed software (47.2%), and installed but useless applications (30.8%) at the top of the list. A close fourth is unused or inaccessible data (30.4%). Companies have had some success in linking brick-and-mortar and catalog operations — only 11.7% say their print catalogs are not linked to other channels, and a mere 9.8% have isolated retail stores. But 29% say their Web site is not connected to other sales channels. The disconnect continues at the corporate level. Only 21% of the respondents enjoy a fully integrated sales and corporate systems infrastructure; 64.5% report basic links between the two, and 11.7% have no such connections at all.
Business gurus say IT outsourcing is booming — and judging by what we found, it certainly is. Nearly a third of our respondents (32.2%) farm out application development. PC maintenance (19.6%) and telecommunications (18.2%) are other favorites to be handed off. Of course, the smaller the organization, the more likely it is to seek outside help: 45.2% of the large companies in the sample say they don’t outsource any IT activities, whereas only 28.4% of the under-$10 million respondents prefer to keep things in-house.
TINKER, TAILOR
For system vendors, there’s good news and bad news. Although off-the-shelf packages are getting better and better, a significant number (46.7%) of our respondents use proprietary or custom-made systems. But the good news is that software that previously got a bad rap has become surprisingly popular: 35% of the companies we surveyed have installed customer relationship management systems, and 20% use ERP software. Material handling control systems also make a strong showing, used by 27.6% of the total sample and 43.8% of the large companies. As in past years, warehouse management systems are the most commonly used programs, installed by 48.6% of the total sample.
Although the most popular technologies are e-mail and client/server applications, wireless and XML are slowly gaining ground. Over a third (33.2%) of our respondents use wireless technology, and 21.5% employ XML. Nearly one-fourth (24.3%) of the companies we surveyed use Web-based EDI. Only 18.7% have Web-based IT architecture.
ON A BUDGET
IT hardware vendors may enjoy better sales next year: 65.9% of the respondents (and nearly 75% of the mid-sized companies) say they plan to purchase desktop PCs and workstations in 2004. Companies also expect to invest in server hardware (39.3%), networking hardware (38.8%), and data storage (29.4%). Systems consultants should do well, too — 32.7% of firms say they will use outside consulting services next year.
Whether they will have the money to do so, however, remains open to question, given a lukewarm outlook for technology and below-average retail IT investment levels (see “Short Takes,” p. 8). Among our respondents, 30.8% say their 2003 capital budget is larger than the previous year’s; for 24.3%, it is smaller, and for 43.5%, it remains the same. Over half the respondents say that just 1% to 10% of their companies’ capital budget is allocated to IT this year; slightly over a fourth say their IT shops receive 11% to 25%. Small firms are particularly disadvantaged — 42% of the respondents in this category receive 1% to 5% of the capital budget for IT.
Much the same pattern prevails for systems integration purchases or upgrades. For this purpose, 53.8% of our respondents receive 1% to 10% of this year’s IT capital budget. A fortunate 16.4% enjoy an allocation of 11% to 25%. Mid-sized companies stand out in this area, with 18.3% of respondents spending 26% to 50% of their IT capital budget on systems integration purchases or upgrades. Conversely, nearly half of the less-than-$10 million firms obtain a meager 1% to 5% for their systems integration activities. And given that the entire sample cites integration difficulties, it is surprising that some respondents — 8.4% of the total sample and 12.3% of the small companies — receive no money at all to fix the problem.
Rama Ramaswami is editorial director of O+F.
INSTALLED SYSTEMS
| Percentage of Respondents | |
|---|---|
| Warehouse management system | 48.6% |
| Proprietary/custom-made | 46.7% |
| Catalog management | 39.9% |
| Customer relationship management | 35.0% |
| Material handling control | 27.6% |
| Enterprise resource planning | 20.1% |
| Transportation management | 19.2% |
| Other* | 5.6% |
| No answer | 6.1% |
| Total respondents = 214 | |
| *Includes governmental, non-profit, and research organizations | |
INTEGRATION PROGRAMS USED
| Percentage of Respondents | |
|---|---|
| Application servers | 64.0% |
| Legacy integration applications | 22.9% |
| Enterprise app. integration systems | 21.5% |
| Content management software | 19.6% |
| Supply chain management software | 19.2% |
| Portal servers | 18.7% |
| None of the above | 19.2% |
| Other* | 0.5% |
| Shipment history | 68.5% |
| No answer | 3.7% |
| Total respondents = 214 | |
| *Includes Web services | |
| Note: Respondents with DCs; multiple answers | |
SYSTEMS INTEGRATION BUDGET
| % of IT capital budget/2003 | % of Respondents |
|---|---|
| None | 8.4 |
| 1%-5% | 37.4% |
| 6%-10% | 16.4% |
| 11%-15% | 6.1% |
| 16%-25% | 10.3% |
| 26%-50% | 10.3% |
| 51%-75% | 3.3% |
| 76%-100% | 1.4% |
| No answer | 6.5% |
| Total respondents = 214 | |
SYSTEMS PURCHASES IN 2004
| Percentage of Respondents | |
|---|---|
| Desktop PCs and workstations | 65.9% |
| Server hardware | 39.3% |
| Networking hardware | 38.8% |
| Outside consulting | 32.7% |
| Data storage | 29.4% |
| Disaster recovery | 21.0% |
| Customer relationship management | 14.5% |
| Business intelligence | 9.8% |
| Enterprise resource planning | 5.1% |
| None of the above | 11.7% |
| Other* | 1.4% |
| No answer | 14.0% |
| Total respondents = 214 | |
| *Includes bar code inventory, security, and voice-recording IVR systems | |
| Note: Multiple answers | |
Methodology
On June 9, 2003, Primedia Business Marketing Research mailed cover letters and two-page questionnaires (each containing 14 questions) to 1,200 domestic O+F subscribers selected by operations, information technology, and corporate management job functions on an nth name basis. A $1 incentive was included in the mailing. By July 16, 214 usable surveys were received, for a response rate of 17.9%. Means and medians were calculated according to standard statistical practices. Results were reported in three categories: companies with annual sales under $10 million (37.9%), between $10 million and $49.9 million (28.0%), and $50 million or more (34.1%). The majority of respondents hold positions in executive and operations management (80.4%). IT managers constitute 13.1% of the total sample. Primedia Business research manager Rick Lowe conducted the research and analyzed the data for this report. To purchase a copy of the complete study, visit O+F’s Web site at www.opsandfulfillment.com.
— RR