Companies fight the downturn with tech

While some companies delay new IT initiatives in the face of the current economic downturn, American Express Co. is using this time -and technology – to gain competitive advantage, the company’s top executive told a group of corporate executives recently.

“The business conditions we currently face are not for the faint of heart,” Kenneth Chenault, chairman and chief executive officer of the financial services and travel company, said at the Forrester Research Inc. Executive Strategy Forum in Boston. “Even with difficult conditions there will still be winners and losers. The winners will be those with the greatest degrees of flexibility in technology, infrastructure and business model.”

Chenault and other business leaders told a crowd of about 450 forum attendees how they are staying committed to online technology projects despite the implosion of the Internet economy. At office supply giant Staples Inc., adding the online sales channel to retail and catalogue sales has more than doubled its average customer’s annual spend, said Thomas Stemberg, chairman and founder. For American Express, technology in general and the Internet in particular have delivered expanded distribution channels and improved operational efficiency, according to Chenault.

For businesses seeking to stay strong despite a bad financial climate, Forrester Chairman and CEO George Colony advised “being a stealth aggressor – use this period when your competitors are not spending on technology to change the rules.”

While one part of Colony’s prescription for leveraging technology included implementing Web services, Colony warned that they are “vastly over hyped and have not been helped by Microsoft Corp. and what he called the “haze” of that company’s .Net strategy. Web services comprise software technology that uses standards including XML (extensible markup language), SOAP (Simple Object Access Protocol) and UDDI (Universal Description, Discovery, and Integration) to link applications across the Internet. They promise to speed companies’ abilities to link to supplier, connect to customers, and simplify internal system, according to Forrester. But companies implementing Web services are finding it challenging work.

“It’s tough and ugly,” said Robert McCormack, senior vice president and CIO (chief information officer) of Aramark Corp.’s Uniform and Career Apparel Group. Aramark is working with XML using BEA Systems Inc. products, and one of the difficulties he’s found is getting different vendors to agree on this supposedly standard technology. “It’s like two people reading out of different books,” McCormack said during a panel discussion among technology executives.

While at Aramark Web services are considered ultimately important but “not a big thing” in the short term, at FedEx Corp., where almost all transactions with customers are electronic, a team of people are working on Web services projects, said Robert Carter, executive vice president and CIO. FedEx is working with products from BEA and WebMethods Inc., and Carter noted the absence of shipping product from Microsoft. “We still don’t have any .Net applications,” he said.

The panel comprising McCormack, Carter, and General Motors’ Chief Technology Officer Tony Scott was then prodded by Colony, who asked, “What about .Net?” Laughter and a pause preceded Carter’s comment that “They’ll get it right over time. There’s a lot of vapor, a lot of hype.”

Nonetheless, for those companies willing to take the plunge into Web services, the business integration they afford may indeed keep the early implementers ahead of the competition. FedEx is using the technology to put package tracking information directly into the screens used by customer service representatives at a large mail-order house. And Forrester researcher Ted Schadler describes how Galileo International is using Web services to deploy new offerings to its customers in the travel industry 10 times faster, and writing 75 percent less client code, than before.

Web services are “a continuation of the phenomenon of using the Internet as a global interconnect,” according to FedEx’s Carter. While the bursting of the Internet bubble may have precipitated today’s economic woes, it appears that companies using technology as a weapon to fight their way out of the downturn are keeping their eyes on the Net’s ultimate promise.