A chat with your CIO.

The next time you're lunching with your chief information officer, try these conversation starters.

If you're worried your CIO may be heading in a direction that doesn't parallel yours or the company's as a whole, perhaps you should take the time to ask some version of these 10 basic questions.

1. Why are we custom-building this application?

Most high-end application software packages sell for approximately 1 percent of their development cost. With this sort of pricing, it's sometimes difficult to justify developing and maintaining custom-based applications, especially those of a more tactical nature.

For instance, frequently we see little competitive value in payroll check-printing processing and fixed-assets depreciation calculations. On the other hand, custom development efforts are often encouraged at the strategic end of the continuum - in such areas as procurement and order entry - since these applications uniquely identify the company to its customers and to the marketplace.

2. What are we doing in information systems beyond transaction processing?

It isn't by coincidence that most package software vendors have created incredible transaction-processing products for their portfolios. Almost any major package software vendor will have accounts receivable, accounts payable and payroll application modules. These three modules usually represent the three most significant cash receipt and disbursement modules in any company. Yet these same software vendors rarely provide any cash management functionality to complete the integration of these three modules. Why? Many companies' information systems exist solely to support the planning, tracking and reporting of business transactions. Therefore, many application software vendors, like most information-technology shops, exist to process these transactions - not to build or grow or manage the company's assets.

Obviously, your firm has many assets that don't show up on the left side of the balance sheet: your intellectual capital, your customers and noncustomers, your suppliers (and those who aren't your suppliers), your image, your quality, your customer satisfaction scores, your reputation and so forth. What data does your system track to support these assets? What information systems exist to help you and your people focus on these critical components?

3. What are we doing about the Internet?

Since many information systems are egocentric, many firms have been slow to pick up on opportunities to use business-to-business or business-to-customer information systems across the Internet. The evolution of information systems is moving beyond the four walls of your firm. Your computer systems must talk to other systems. Everyday, new generations of vendors are coming into the marketplace with products to connect your package software to other vendors' package software.

But you must plan your Internet access and applications well. Your firm must architect the necessary security to protect other information assets before you open your company to the Internet. After you've done that, the Internet represents a significant chance to simplify communications. Indeed, for many new firms, the Internet is their network. They never built or supported any other network; they simply use the Internet.

Failure to understand and exploit your opportunities in this sector may leave your firm at a disadvantage in the competitive marketplace. Delays in matching or exceeding your competitors' business-to-business systems integration capabilities may have an equally surprising effect on your bottom line.

4. Given the increasing dynamism in our business and in our industry, how flexible are our systems after they've been installed?

Flexibility after the fact, or "forgiveness," has become one of the most important characteristics of new application software. Whether you custom-build or acquire systems from a package vendor, the software must be highly malleable. Software with numerous functions and features is of no use to a company in a dynamic business environment if you can't change it quickly while in production.

Take a simple test to prove this: If in the last 18 months your company has made a significant acquisition, divestiture or new competitive entry or has developed new products or services, opened or closed markets in different countries or changed CEOs (you get the idea), how easily did your software make these adjustments?

5. Why do we have so many end-user reporting tools, and are we at risk with all this diversity?

Newer packages bring with them an astounding number of third-party tools. On average, client/server packages contain more than two dozen third-party tools in their product mix. These tools enable the vendor to deliver more products to market more rapidly. Yet, if you introduce all these new tools in your environment and you don't actively manage them, you may be in trouble. Why? Because the interoperability of dozens, possibly hundreds, of tools is essential to keeping your production systems functioning as you deploy new client/server products.

That's why limited system diversity is an objective of many companies. Look at it this way: If you buy only six of the leading application software vendors' product lines, you could easily have 100 unique, third-party tools in your company. What are the odds that all 100 tools and their applications will continue to correctly inter-operate once you complete a major systems upgrade, like moving from Windows 3.1 to Windows 95?

6. How much integration do we really need?

Suites of application products certainly may offer you a significant value because they allow you to outsource the development, maintenance and integration of many applications and you can implement more applications with less custom-developed interface code. But you may face some management questions.

For instance, do you really need to see movement of the work-in-process inventory around the world in real time and in the corporate consolidated set of books within minutes of the movement? For many companies, integration moves up in Christmas-tree fashion: Plants or other operating units absolutely need integration in real time, while divisions or business units find hourly data quite satisfactory, and the home office thinks daily information is adequate.

Be aware that real-time integration across all levels and locations of an enterprise presents a daunting telecommunications and database synchronization problem. It's not that the problem can't be resolved, but the expense of keeping the network in place globally may be far greater than the benefits you get from having data that's just seconds, not hours, old.

7. What value is in the business case for our new systems?

For decades, financial executives justified new information systems expenditures on their headcount savings. By automating manual tasks, they could see greater productivity with fewer personnel. But now that most high-volume transaction processing has been automated, where will you find new benefits and new value? Look in areas like business-to-business commerce, global integration of the enterprise, knowledge management, asset-building systems, custom strategic applications and data-mining applications.

The focus of these business applications is beyond straightforward efficiency gains. These systems improve your firm's competitive speed in the marketplace. They enable you to know more than your competitors do - and to know it faster.

8. Should we partner with a software vendor?

When buying software products, many companies believe they'll become an integral, co-development partner with the software vendor. But the vendor and others within your firm may not agree.

Partnering has many degrees of differentiation. Smaller firms may find themselves treated as nothing more than a transaction to a large software company. On the other hand, some firms may receive very preferential treatment if they represent a unique opportunity for a vendor to crack a particular vertical market.

If you desire a partnership or highly influential relationship with a software vendor, candidly ask yourself: What is it I intend to give and get in this deal? Does the vendor really need me as much as I need it?

9. If technology continues to rapidly become obsolete, what are we doing to improve our speed of assimilating new technology?

The number of patents and inventions continues to grow. One of the industries that's naturally seeing the most of these innovations is information technology. If your firm takes the same amount of time to implement new technology that it took 10 years ago, your information systems, work processes and change management techniques may need some adjusting.

Some of this may not be the fault of information technology, as the scale of projects in many firms has gone from single-department and single-division solutions to global, enterprise-wide implementations. So don't confuse product complexity with project complexity when you assess if you need help in this area.

With all the new technology available, who has the responsibility to pick the pieces most valuable to your firm? New job titles, like "Technology Evangelist," are showing up on business cards for people who review and recommend new technologies. The best of these people do the following:

* look for products that integrate and improve process flows (not just re-automate functions),

* combine two or more technologies to dramatically reduce process time (for example, use the Internet and smart agents to automate shopping decisions so purchasing personnel are able to spend more time optimizing inventory) and

* look beyond your industry for innovations to apply in your firm.

10. Just how exposed are we to the "Year 2000" software conversion problem?

Year 2000 concerns weren't getting much air play one year ago. Today, they're top-of-mind issues to many technology executives. But Year 2000 problems show up in the strangest places, like in stamping machines, budget spreadsheets, depreciation schedules and benefits planning. The impact varies from company to company, but don't go naked into this issue. Honestly assess the issue now, if you haven't already.

Also, be careful that package vendors don't delay shipments of your application software upgrades to fix these shortcomings. Such delays can prove very costly to your firm, since the time it takes to receive the applications added to the time you need to implement the changes may stretch beyond the window of opportunity for your firm to fix the problem.

IN SHORT

* Your company's software must be able to adapt to a dynamic business environment. How easily does your current software adjust to such changes as opening and closing markets in different countries?

* Client/server packages contain, on average, more than two dozen third-party tools in their product mix. That could be a problem if you don't actively manage the tools once you introduce them into your system.

* The expense of keeping a real-time, integrated network in place globally may be far greater than the benefits.

Mr. Sommer is worldwide director of Andersen Consulting LLP's Software Intelligence Unit. You can reach him at [phone] or by e-mail at [e-mail].