Manufacturers struggling to align technology with strategy

Posted by Isobel Drake on 10th September 2008

More than 75 per cent of business executives and 80 per cent of information technology (IT) executives believe that IT should be a key area for investment, but only one-quarter actually believe this investment is being made, according to a report released by the Grocery Manufacturers Association (GMA).
The report suggests that this disconnect between the desired and actual role of the IT function in company operations is the result in part of misaligned business strategy, wherein business executives view IT as a cost of running the business as opposed to a key player in revenue generating initiatives.

“The average IT budget for a CPG company is just over 2 per cent of revenues and has not grown significantly in the past five years,” noted Jeanne Iglesias, GMA senior director, supply chain and technology. “Until companies realise that IT can make strategic contributions well beyond the day-to-day operations, this lack of funding is likely to remain a challenge.”

Overly-complex technological environments are another barrier to improving IT effectiveness, according to the report. Organisations with annual revenues of more than $1 billion reported utilising more than 750 applications within their systems. This complexity hampers their ability to harness IT for more strategic purposes.

“In an increasingly competitive environment, companies must leverage every asset to gain an advantage,” advised Gerrit Schutté, senior vice president and chief information officer, ConAgra Foods Inc., and member of the GMA Information Systems Committee. “The IT function has the opportunity to be a difference-maker, but only if IT executives assert their team’s potential and focus on value-adding activities.”

Conducted by IBM and AMR Research, the GMA Information Technology Investment and Effectiveness Study was based on survey responses from 118 executives from 46 consumer packaged goods (CPG) companies.