Recession has managers reassessing value of technology


December 30, 1991|By Jon Van | Jon Van,Chicago Tribune

CHICAGO -- The lingering recession teamed with other factors to make 1991 the year when corporate America began to talk of holding its information systems department accountable for performance -- a concept foreign to many.

Even though most aspects of commercial enterprise long have been oriented toward the "bottom line," the often arcane world of information technology has traditionally escaped the sort of scrutiny focused on production or sales departments.

But as recessionary pressures have forced managers to reassess every dollar they spend, more are looking at information technology and asking what, if any, productivity improvements their money is buying.

It was just one more burden for the computer industry in a year when demand and prices appeared to be in free fall and several industry giants looked toward mergers and alliances in search of shelter.

Most industry observers now believe that the personal computer market is saturated or close to it and that hardware has become a commodity destined for low profit margins. New boxes with bright colors and bells and whistles just aren't going to turn things around, observers predict.

It's no surprise, then, that customers are demanding results that live up to the vendors' promises.

Computer-assisted software engineering -- known as CASE -- once a hot development in software tools, has been the first information technology to be affected. The market for CASE tools, once pegged at 35 percent annual growth through 1995, has stalled.

Many managers have put plans to expand CASE on hold while they struggle to justify the often hefty expenditures required.

For about 20 years, CASE has been the industry's chief hope of taking computer programming from its status as a craft and turning it into an engineering exercise. The goal is to reduce the time it takes to assess a company's needs, design a system and write software. CASE tools also should enable programmers to produce software with fewer errors that is more likely to run as intended.

At many companies, a few people working with information systems have tried some CASE tools to get a feel for their efficacy. Now, as managers become convinced they should expand their use of CASE, they are running up against the reality of stagnant departmental budgets, said Robert L. Bush, a consultant specializing in information technology.

Users in the aerospace, defense and engineering applications have been quicker to see the value of CASE, Mr. Bush said. But in the commercial sector, many managers are dubious.

"Managers have a hard time justifying acquisition of new tools that require a heavy investment while promising an intangible payback two to three years down the line," he said.

The reversal of CASE fortunes was underscored this fall when Knowledgeware, an Atlanta-based leader in this technology, posted its first quarterly loss ever.

A wave of mergers and acquisitions among vendors is one reason the rush to acquire CASE tools has slowed, Mr. Bush said. Managers aren't confident that the tool they buy today will be supported tomorrow by a vendor that could be absorbed into another company.

Also, the kind of money involved has attracted attention from higher echelons in companies that previously ignored information technology expenditures.

Ed Yourdon, publisher of the New York-based journal American Programmer and a respected software guru, said that when a few people in a firm are using CASE tools, it doesn't attract as much attention as when the department wants to equip 100 or more programmers with the tools, which can cost $5,000 to $10,000 each.

"Suddenly, you are talking big bucks, and these things can get bucked up to the board of directors," he said. "Directors are starting to ask 'Where's the return?' The claims of vendors of 30 to 40 percent productivity improvements are hard to document."

Many companies are beginning to wonder if there is any correlation between the amount of money spent on computer systems and those systems' ultimate value to the company, Mr. Yourdon added.

There is growing evidence to fuel this attitude. A study published recently by Killen Associates Inc. of Palo Alto, Calif., noted that even though enterprises in North America and Europe installed more than 10 times more computing power in the 1980s than in all the years since computers became available, white-collar productivity actually fell.

A year's worth of interviews by Killen, which specializes in information technology consulting, found that for the 1990s, many top executives have decided to shift resources, putting more emphasis on improving management techniques and less on acquiring new technology.

Amid general corporate unrest with information technology, CASE may attract special attention not only because of its costs but because of its complexity. CASE requires a year or more of retraining, reconfiguring and methodology consolidation before it can be implemented, Mr. Yourdon said. During that time, productivity may decline.

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