The ongoing economic slump is prompting businesses to devote IT resources to projects aimed at keeping downsized enterprises humming in the face of across-the-board staff and budget cuts.
The United Air Lines Inc. unit of UAL Corp. is a case in point. The Sept. 11 terrorist attacks on the United States, coupled with a sliding U.S. economy, prompted United to furlough almost 20,000 workers. That cut included 30 per cent of the Chicago-based airline’s IT staffers, or about 600 employees. However, IT is still in the forefront of beefing up customer service and thus improving United’s overall responsiveness to the immediate business climate.
“After having just reduced our workforce throughout the company, including reservations, that’s putting a huge strain on the reservations people who have to call people and take calls from people,” said United chief information officer Eric Dean.
In the midst of flight and staffing reductions, United this week launched a revamped reservations system. The system makeover was in the works prior to Sept. 11, but new functionality to handle automated re-bookings and support readjusted flight schedules was added to alleviate burdens on the reservations staff and to make flight transfers easier for passengers.
“Largely, this was done to respond to what the real traffic currently is, rather than focus on just cost saving,” said Dean. “But this is a revenue-generating mechanism to make flying more convenient.”
United’s IT operation is also stepping up the use of its EasyCheck-in self-service kiosks to compensate for fewer ticket-counter employees. Those kiosks allow customers to bypass long lines at airport ticket counters and retrieve boarding passes from automated machines.
Though the airlines face the double whammy of a limping economy and the consequences of the terrorist attacks, IT leaders in the industry aren’t alone in instituting measures to ensure that technology investments are aligned with current business priorities.
The world’s largest producer of Sheetrock, with US$4 billion in revenue last year, Chicago-based USG Corp. filed for bankruptcy protection under U.S. law this past summer. USG chief information officer Jean Holley said her IT budget remains intact, but she’s adopting a more targeted approach to new development projects to ensure high quality controls and a fit with current business needs.
“We are now selling our product for half of what it sold for two years ago,” said Holley. “My dollar amount [for IT spending] hasn’t changed, but my runways are shorter. Instead of 50 projects, we do six and nail them before we move on.”
Some of those projects include creating online design and materials estimation tools that contractors can use to determine Sheetrock requirements instead of calling a customer support representative.
Vin Melvin, chief information officer at SCI Systems Inc., has adopted a similar approach. The $9 billion Huntsville, Ala.-based maker of electronic components has also abandoned the practice of undertaking a flurry of projects at once.
“A lot of people in the IT organization were trying to stay three projects ahead. Now we’re trying to gain value with one or two before starting something new,” said Melvin, adding that a customer relationship management project is taking on renewed importance as SCI tries to keep better tabs on its customer responsiveness.
“IT is getting pulled in all directions at once,” said David Bradshaw, an analyst at London-based Ovum Research Ltd. “But projects with immediate returns are still getting the nod.”
Projects that stay on top of changing business requirements have renewed importance, as do those that offer immediate cost reductions, according to CIOs.
Headlamp and taillight maker Guide Corp., for example, plans to launch a shop floor application early next year that’s geared toward finding and reducing defective materials. By detecting defects early on, Guide has a better chance of fixing and reusing those products, and the company expects multimillion-dollar annual savings, said Jim Johnson, CIO at the Pendleton, Ind.-based manufacturer, which posted sales of US$600 million last year.
“The economic downturn has exacerbated the situation, but we were focused on trimming costs before,” Johnson added. “You can’t say IT is saving the company seven figures, but you can say IT is helping to meet our business objective of a seven-figure cost reduction in scrap materials.”
