CIOs: We’re not buying unless it saves us money

SAN FRANCISCO – Hawking IT products gets tougher as the economic dip persists. The “do not disturb” sign on many CIO’s door doesn’t help either. So vendors flock to where CIOs speak to get the inside scoop on where the money is going.

The Churchill Club, a Silicon Valley IT industry forum, packed a large ballroom in the San Francisco Hyatt Regency hotel Thursday evening. Headlining were the CIOs of four very different companies: clothing giant Levi Strauss, Charles Schwab, engineering and construction group Bechtel and Cisco Systems.

Vendors made up the majority of the audience, eager to learn whether their products would make it past the gates at any of the CIO’s companies. Some shockwaves were felt when the CIOs voted down three to one the ASP (application service provider) model and enterprise instant messaging.

Other technologies that are considered up and coming, including wireless networking and IP telephony, also did not do well, except with Cisco which not surprisingly uses both extensively.

“The cost of IP [telephony] is justified only when you start something new, not as a replacement,” Bechtel CIO Geir Ramleth said.

Geoff Penney, CIO at Schwab, said the same about wireless networking. “If we are doing a new building today, we’re doing it with wireless. But in the absence of a new building we have a hard time justifying wireless.”

There is some light for vendors, especially in the security space. All four CIOs expect there will be a chief security officer (CSO) at their company in the near future, for example. Also, Levi Strauss and Bechtel see a bright future for RFID (radio frequency identification) as a way to save money on inventory management.

“RFID is huge,” Levi Strauss CIO David Bergen said. “Today you have to physically barcode all of your products to inventory. With RFID you can just walk down an aisle and get an inventory.”

Bechtel is also very interested in RFID. The company wants to use the tagging technology to make it easier for engineers working on a power plant, for example, to find the right pipes in a piping yard by displaying the location on a layout of the yard on a computer. “That will have a tremendous effect on our business,” Ramleth said.

For Schwab, on the other hand, RFID does not mean much. “We have not figured out how to use RFID. We are about people and information. The information, we know where that is. The people, well I really don’t think it will go that far, there are all kinds of concerns there,” Penney said.

Enthusiasm about some of the new technologies aside, none of the four companies are looking at splurging on any of it. Any investment has to make sound business sense and preferably result in savings for the company, providing a quick return on investment, the CIOs agreed.

Sad for the vendors, but there aren’t many of those products that the CIOs haven’t already heard about, Schwab’s Penney said. “We buy things that fill a need. It is very rare that somebody will call me and pitch something that we say my golly that fills such a need, we had not thought or that,” he said.

Bechtel is not buying anything right now, said Ramleth. “We do a lot with what we have,” he said.

Looking at IT budgets, Cisco’s CIO Brad Boston said he is still investing in IT.

Schwab’s IT budget is “in a down curve,” but Penney said he manages to “do the same with less money.”

“We are focused on driving cost out, while increasing service” to our users, Penney said.

At Bechtel the IT budget is “way down,” Ramleth said.

Levi Strauss is in the middle of a large implementation of SAP applications that eats up a significant part of the budget, said Bergen. “And I don’t see that changing in the future. If we are buying, we are buying to consolidate.”

Although entertained by the discussion, audience members said they weren’t too surprised by what they heard.

“Each one of those guys was pretty different on what they said they were looking for. Obviously there is spending going on, but it is not growing,” said Bruce Lowry, director of public relations at Novell. “Tech spending is not going to take off until companies like Bechtel, Levi Strauss and Schwab are doing very well.”

Tim Smith, director of marketing at TeaLeaf Technology, a small company that helps businesses solve problems with Web applications, was both encouraged and discouraged by what the CIOs said.

“They are still looking to innovate and they are still willing to work with small companies,” Smith said. Even if there is no money in the budget, TeaLeaf sometimes finds that its clients have “unbudgeted money” to spend on Web projects, he said.