IT gets back to business with its budgets in 2000

As corporate IT managers begin to see the light at the end of the year-2000 tunnel, future plans are quickly forming to get companies back on the fast track to success -- and the destination is electronic business.

With the year-2000 lockdowns that have stalled other technical projects behind them, IT departments expect more human resources and funds to be available for the coming year. Consequently, they are ready to adopt ebusiness technologies for electronic commerce, customer relationship management (CRM), and other critical enterprise functions, according to analysts and IT professionals.

A recent International Data Corp. (IDC) report shows that officials at 58 percent of companies surveyed about IT spending for 2000 said that their companies were putting money back into mission-critical applications such as enterprise resource planning (ERP) and CRM. Sales-force automation applications were also noted as priorities for next year.

The next application category to benefit next year is Web-enabled applications and e-commerce. IDC reports that 23 percent of all companies surveyed plan to dedicate funding to Web site development, e-commerce applications, or both.

"The big thing [for us] is going to be the ERP, PeopleSoft, and SAP rollouts -- and the other is our big thrust toward electronic commerce, helping to ensure the way we interoperate with our customers and suppliers," said Elaine Hinsdale, manager of communications at Enterprise Information Systems, Lockheed Martin's IT branch, in Orlando, Fla., which spent more than $80 million on its year-2000-preparedness efforts.

"[E-business] helps us provide a better service more efficiently to those we need to do business with," Hinsdale said.

Analysts are not surprised that IT shops will be picking up where they left off before the year-2000 glitch became the issue of the day.

"A lot of these priorities make sense, because what people were doing before year 2000 sidetracked them was enterprise applications," said Tom Oleson, research director of IT services at IDC, in Framingham, Mass. "Many of those projects were for existing applications, but there are some new ones -- particularly in the CRM and sales-force automation areas."

Other priorities for IT spending next year, IDC reports, are distributed-hardware development (24 percent of all companies surveyed), adding new hardware and software capacity for development (28 percent), and rehosting enterprise applications (29 percent).

Although generous resources -- both human and financial -- will be freed up for other projects next year, many companies still have earmarked funds for year-2000 problems that arise after January 1.

"On a nationwide basis, we lowered our estimates [for year-2000 spending] from $12.2 billion [in 1999] to $5.6 billion [in 2000]," IDC's Oleson said.

Many vendors are betting soundly that next year will be a growth year for their business in light of these spending priorities, especially in the areas of ERP, Internet commerce, networking, and security.

"Without a doubt, it's going to be one of our busiest [years] -- even today, we've actually seen an acceleration of security projects now that most companies are done with Y2K," said Chris Klaus, chief technology officer at Internet Security Systems, in Atlanta. "They still may have a freeze on their network in terms of applying new e-commerce apps, etc. -- but they're now putting in RFPs [requests for proposal] and RFIs [requests for information] ... to do these major projects."

IBM, whose very rally cry is e-business, expects to see big spending from its customers for e-business projects.

"Ninety percent of [our customers] tell me most of that money is going to now be devoted to e-business-type applications. It's the No. 1 application area that they plan on addressing," said Peter Tarrant, vice president of e-business applications at IBM, in Armonk, N.Y. "As a result, I think we are going to start to see some of these other core business processes addressed with those resources."

But before companies bet the house on e-business, some analysts are forecasting that the e-business buzzword is "overinflated hype," which is ripe for "investor disillusionment" and a series of "e-failures" in the near future. Analysts at the Gartner Group believe that e-business is currently at its peak of hype, which will lead to a sharp adjustment of expectations over the next four to five years before reality sets in.By the years 2006 to 2008, the term "e-business" itself will disappear, analysts at the Gartner Group said, achieving such ubiquity as to become irrelevant.

Overall, implementing e-business will take patience and care to be accomplished successfully. Gartner analysts painted a grim picture for the next decade of e-business, predicting a 75 percent failure rate for all e-business projects.

According to a Gartner Group report issued on November 9, "such failures will occur not because e-transformation is wrong, but because the business model, strategies, and implementation will have failed. During this phase, enterprises must separate hype from reality and learn from businesses that: 1) understand the need for both brick-and-mortar and 'click' strategies; 2) make appropriate strategic marketing and technical decisions; and 3) manage the organisational transition to 'e' correctly."

Regardless of the possibility of failure for e-business projects, many corporations know they have to go forward with such adoptions for competitive reasons, because they see no alternative.

"For an aerospace defense leader like Lockheed Martin, we are headed toward e-business," Hinsdale said. "In aerospace defense right now, we are not selling C-130s on the Web, but we will be doing electronic transactions via the Web in more areas as the years progress."

One thing that can be agreed upon is that the end of year-2000 preparedness -- and the strengthened IT departments that have emerged from underneath that burden -- will have more than enough strategic business projects to keep them busy next year.

"There is a perception on the part of companies that they are a half-year behind everybody else on the Web," said Christopher Hancock, president of RightSize Systems, a systems integrator in Santa Monica, Calif. "The reality is nobody is there yet and everybody is trying to figure it out."

Ephraim Schwartz contributed to this article.

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