QUESTIONING THE SYSTEM Recession has managers reassessing value of technology

CHICAGO — 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.

Whether long-term benefits are worth the time, money and effort that CASE requires is a matter of some debate among information technology specialists.

CASE is intended to bring uniformity and consistency to information system development, but it has a spotty record, said Gary Curtis, vice president for information technology in the Chicago office of the Boston Consulting Group.

"The issue is that no one has been able to scale it up consistently and effectively to a large department," Mr. Curtis said.


In smaller, limited applications, CASE experience tends to vary, ranging from almost no productivity gains to improvements of 60 percent or more, he said. "There are a lot of imponderables involved."

Because it is a big-ticket item, CASE has attracted attention to industry's general inability to evaluate information systems.

In a recent issue of CIO magazine, it was estimated that fewer than 30 percent of the Fortune 2000 companies have any system to evaluate software development -- whether or not they are interested in CASE.

As computers have become nearly ubiquitous in U.S. business, they gradually have lost some aura of wonder for non-technical people, who are beginning to ask why information technology shouldn't be subjected to the same scrutiny as the rest of a business.

Donald Frey, a former chief executive officer of Bell & Howell who is now on the faculty of Northwestern University's J. L. Kellogg Graduate School of Management, has firsthand experience with this phenomenon, since he sits on several corporate boards.

"There seems to be a rather small impact of computers on efficiency," said Mr. Frey, a professor of industrial engineering and management sciences. "People are starting to ask, 'How does this relate to the bottom line?' People who are lay people -- non-techies -- are saying, 'Wait a minute, here's a $5 million bill for something. What happened to the $20 million we've spent over the last several years?' This questioning is adding to the slowdown of the computer business."


Another issue motivating managers to evaluate their information technology is the threat that if they cannot justify their departments, the company will cut them back or even close them and hire outside contractors.

"The threat of out-sourcing is a big driver for greater accountability," said Nancy Spencer of Computer Power Group Inc. in Oak Brook, Ill. "A lot of companies are decentralizing their information systems departments."

Several companies seem firmly committed to evaluating information technology, getting control of it and setting goals to boost efficiency and productivity, she said. But none have progressed past the earliest stage of this process.

"It's very difficult to change the culture," she said. "You are imposing controls on people who haven't had these things hanging over their heads. These are often people who viewed themselves as artists writing software. Now they feel they are seen as engineers in a production line turning out a product, and they don't like that."

While many 1991 developments have brought generally gloomy news to vendors, there have been bright spots for buyers. The free fall in prices, for instance, meant that many buyers were able to fill their computing needs at bargain-basement prices.

A recent survey by InfoWorld, a California-based trade publication, found that 43 percent of corporate PC buyers surveyed said they either were buying more machines or more powerful machines on their fixed budgets for new hardware.


"With PC prices continuing to come down and budgets remaining tight, corporations are looking to make the most of their technology investments," said Jonathan Sacks, InfoWorld's publisher. "Some are opting to get more power for the same price, while others simply want to boost the number of PCs they bring in-house."

Most buyers surveyed expect prices to continue to fall for at least the next year.