Information technology: justifying the investment. (CEO Survey Report: Advertisement).

In a struggling economy, where developments in technology continue at lightning speed, business automation is a competitive advantage no CEO can afford to ignore.

Investment in business automation is widely regarded to be one of the greatest drivers of improved productivity over the past 10 years. While a struggling economy and the unpredictability of the future have spurred the highly visible slowdown in technology investment, executives and economists agree that renewed business technology investment is what is most likely to spur broad economic recovery. But some executives have doubts about the relationship between investment in business automation and the creation of measurable, sustainable business value.

A survey of more than 350 Chief Executive readers conducted by Cap Gemini Ernst & Young U.S. LLC found that nearly all executives consider IT to be essential to success in the current business environment, where cost cutting and productivity gains have emerged as the only ways available to increase profit growth. IT has become a part of the fabric of doing business, with most executives using it every day to run their companies.

WHAT READERS SAID

* Information technology issues are an important priority for 9 out of 10 CEOs.

Fifty-four percent of CEOs view IT issues as important enough to review regularly; another 37 percent consider IT a key priority requiring weekly attention. [See Chart 11 Nearly 6 out of 10 CEOs consider IT to be an essential business tool, and 31 percent view it as a critical source of competitive advantage. [See Chart 2]

* The senior technology executive plays a critical role in leading and managing most companies.

In 48 percent of companies, the senior technology executive participates in all critical strategic and operational decisions; in 25 percent of companies, the executive participates often; and in 20 percent of companies, the executive participates only occasionally.

* Many boards are overseeing their companies' IT plans.

In 48 percent of companies, the board reviews and approves technology plans on an annual basis, with 14 percent reviewing technology plans at almost every meeting. In another 19 percent of cases, the boards review technology investments that exceed capital investment thresholds.

* In the majority of companies, the CEO holds the IT reigns.

In 52 percent of companies, the senior technology executive reports directly to the CEO; in 21 percent the executive reports to the CEO; and in 18 percent the executive reports to the COO.

* Companies are watching what they and their competition spend on IT.

Sixty-one percent of CEOs know what they spend vs. the competition on IT. Of those, 41 percent spend more than the competition, 34 percent spend about the same, and 24 percent spend less.

* Business magazines and newspapers are the leading sources of information about new technology.

Fifty-seven percent of CEOs depend on business magazines and newspapers to stay informed about technology developments; 41 percent participate in regular briefings from vendors, internal IT executives and industry analysts; and 38 percent receive and read internally prepared summaries of technology news on a regular basis.

* The majority of CEOs regard their IT resources as a critical competitive advantage.

Fifty-three percent of CEOs believe their IT resources enable them to be faster and more effective than their competitors when launching new products or offering new services, while 27 percent feel it has no impact, and 18 percent say their IT restricts their speed. Fifty-six percent of CEOs say their IT resources help them define and deliver an effective and rapid response to actions by their competitors, while 32 percent say their IT resources aren't a significant factor, and 12 percent believe their IT resources restrict the speed and effectiveness of their reaction.

* Delivery of information falls below needs for more than half of CEOs.

Thirty-nine percent of CEOs say that they can always get the information they need to run their businesses in a timely fashion, even when their needs change frequently. Twenty-seven percent get the information they need quickly enough so long as their needs don't change much. Twenty-five percent report that a lot of effort is required to get their information.

* Although most CEOs have confidence in their IT disaster plans, the majority admit that their business would be unable to operate inside of a week without IT.

Seventy-one percent of CEOs say that they do have appropriate plans and processes in place in the event of a disaster, while 23 percent report that they do not. Seventy-three percent feel their IT resources are adequately protected and secure. Sixty-seven percent of CEOs say that their businesses would be unable to operate in less than a week without IT, with 25 percent suggesting that their businesses would be unable to operate in less than one day. Twenty-eight percent believed they could continue to operate beyond the first week without IT.

* IT investment is necessary to remain competitive, and more often than not it also returns shareholder value.

Half the CEOs believe their IT investments have returned real value to their shareholders over the past decade. Forty-two percent say that while their IT investments have been necessary to remain competitive, their shareholders have gained no real advantage from them.

* Three-quarters of CEOs use their IT resources every day.

Seventy-five percent of CEOs use IT as a routine part of their daily work, while 15 percent use IT occasionally, and 8 percent depend on others to use the available technologies for them. [See Chart 3]

* Outsourcing is considered by many to be a viable option for certain aspects of IT.

Thirty-four percent of CEOs would outsource software development and deployment, and 34 percent would outsource software maintenance and enhancement. Twenty-eight percent would outsource support services (help desk, desk-side, break/fix, etc.), and 28 percent of CEOs would outsource the technology infrastructure (data centers and network). Thirty-nine percent of CEOs would not consider outsourcing any IT. [See Chart 4]

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RELATED ARTICLE: TWO EXECUTIVES SHARE THEIR VIEWS

Chief Executive asked two survey respondents to expand on a couple of key points from the survey. Donald Schneider is chairman of the board of Schneider National, Inc., a $2.6 billion transportation and logistics company; Stew Krentzman is COO of OKI Americas, a division of the $6 billion electronics giant.

The executives agreed that IT is essential to conducting business in the 21st century. Schneider points to the optimization models that enable his company to evaluate millions of contracts and determine how to ship them all on time and at the lowest cost. "This can only be done with the kind of capacity IT gives you--the human mind just can't do that," he says. Krentzman notes that "as the overall economy has compressed, in order to gain any competitive edge at all, people are using technology to identify and then address where value-chain savings can occur."

Their opinions diverge, however, when evaluating whether corporate investments in IT have resulted in shareholder benefit. Schneider's view is positive: "In our case it allows us to differentiate ourselves in the marketplace, and as a result gain access to the kinds of customers that would not be possible if we did not have our IT. A lot of our competitors just don't have it." But Krentzman points out that this is not true in every case: "I don't think a lot of businesses have determined what the current best practices should be, so I think they've disappointed a lot of people because all they have done is automate what they've always been doing."