Aiming High in Low-Budget Times

eLABorations: Some companies are actually spending money on IT, and (gasp!) even innovating.

As CIOs prepare their 2003 budgets for review by their CEOs this month, it seems that theyre all running into the same conundrum: Should a company invest in technology and innovation during belt-tightening times in preparation for an elusive economic recovery?

After all, the bad news just seems to keep on coming. As corporation after corporation releases warnings on Q3 earnings, CIOs must be cringing. It takes a lot more than a few million dollars to prepare systems for a Web services revolution, adhere to Microsofts Software Assurance, or even rip out an entire IT infrastructure and replace it with Suns Project Mad Hatter

At a Sun press conference this week, Jonathan Schwartz, who heads Suns software group, claimed that IT buyers were indeed spending money on new systems. Reporters arched eyebrows and snickered like the cynics we tend to be. But Schwartz is on to something. CIOs may not be ready to rip out systems to replace them with Sun servers and Linux desktops—and they may never be ready. But there are certainly some companies out there that are actually spending money, and (gasp!) even innovating.

Take General Motors. At the Economist Innovation Award and Summit in San Francisco earlier this week, Daniel McNicholl, CIO of General Motors North America, said he has allotted $400 million of his $2 billion IT budget as discretionary spending for new projects in 2003. And get this: hes not even asking his CEO to increase next years IT budget. How is McNicholl pulling this off? Hes reducing back-end operating costs. For every dollar saved, hell spend 60 cents on new technology, and give 40 cents back to the shareholders.

McNicholl is the first to admit that as the CIO of GM, he has a lot more pull and money behind him than most organizations. The guy, after all, has Microsoft helping him build a Web services based application that provides his suppliers with engineering specifications built on Microsofts .Net platform. Still, hes proof that tough times dont limit the best CIOs to purchasing new servers and upgrading to the latest OS. If GMs competitors arent doing the same, theyre going to face some tough competition. This is because when the economy does finally recover, you can bet GM will be prepared.

Is your company investing in IT next year? Let me know at