Consulting & Business Services: Services Firms Boost Tech DollarsConsulting & Business Services: Services Firms Boost Tech Dollars

Business-services companies are ahead of other industries in ramping up technology spending.

Paul McDougall, Editor At Large, information

September 17, 2004

5 Min Read
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At Bowne & Co. Inc., a provider of financial-printing services, this is a year to catch up on IT system upgrades that had been put off during recent years of budget watching. Bowne's IT spending this year will jump 11% above last year's level. "It had reached a point where there was too much risk associated with not proceeding" with upgrades, CIO Ruth Harenchar says. It helps that Bowne's revenue climbed 8% in the first six months of the year, to $607 million.

The economic downturn didn't hit business-services firms such as Bowne as hard as dot-com companies and manufacturers, and, as a result, services providers have been investing more heavily in IT in recent years, analysts say. The business-services sector will lead all other industries in year-over-year IT spending increases this year, Forrester Research analyst Nicholas Wilkoff says.

Bowne's IT team is busy refreshing "virtually every aspect of our infrastructure," Harenchar says. New Hewlett-Packard Alpha computers are replacing old VAX machines, and Unix and Intel servers are getting updated, too. The wide area network is being converted from point-to-point frame relay to meshed Multiprotocol Label Switching technology. And new EMC Corp. storage systems are being wheeled into the data center. If the challenge over the past few years was trying to squeeze every last bit from the company's previous IT investments, the onus now is deciding what to do next, given all the projects in the queue. "The shift has been from trying to make do to figuring how many simultaneous projects we can handle," Harenchar says.

Other business-services firms have equally aggressive IT plans that are linked to increasing demand for their offerings. Hewitt Associates LLC, a provider of human-resource outsourcing services, is beefing up its infrastructure to better serve a rapidly growing client list that has resulted in an 11% increase in business booked in the company's most recent third quarter. Among other things, Hewitt is invoking Web services to build portals through which its customers' employees can access their critical data--from 401(k) balances to health-insurance benefits--through a single Web site using a single password. Hewitt also recently added software that lets its portals more quickly serve up information that employees are most likely to request.

CIO Perry Cliburn says investing in Web services and other integration technologies is essential for a company like Hewitt, which needs to pull data from service providers ranging from insurance companies to fund managers and deliver it to employees in a unified format. "Business is moving to an online, real-time world," Cliburn says, "so everything that enables a tight data flow between ourselves, our clients, and other third-party providers is a key enabler for our success."

INDUSTRY LEADERS Company Revenue in millions Income (loss)
in millions Ernst & Young LLP $13,136 -- Manpower Inc. $12,185 $258 Waste Management Inc. $11,574 $630 BBDO Worldwide $8,921 $676 First American Corp. $6,214 $451 Allied Waste Industries Inc. $5,247 $129 Pitney Bowes Inc. $4,577 $495 BearingPoint Inc. $3,139 $41 Cintas Corp. $2,814 $272 Booz Allen Hamilton $2,700 -- ABM Industries Inc. $2,263 $90 Spherion Corp. $2,070 ($14) Hewitt Associates LLC $2,031 $94 FedEx Kinko's Inc. $1,867 -- Volt Information Sciences Inc. $1,610 $5 Iron Mountain Inc. $1,501 $85 Wheels Inc. $1,500 -- Day & Zimmermann Group Inc. $1,351 -- Maritz Inc. $1,340 -- Paychex Inc. $1,294 $303 Lanier Worldwide $1,087 -- Bowne & Co. Inc. $1,065 ($9) CDI Corp. $1,060 $23 Allegis Group Inc. -- -- Battelle Memorial Institute -- -- Deloitte Touche Tohmatsu -- -- CH2M Hill -- -- Nielsen Media Research Inc. -- -- Ogilvy & Mather Worldwide -- -- Towers Perrin -- -- Young & Rubicam -- -- Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Dashes indicate companies requesting financial information not be disclosed.

SNAPSHOT INSIDE COMPANIES Average portion of revenue spent on IT 4% Companies using radio-frequency identification 4% Companies globally sourcing products and supplies 59% HOW COMPANIES DIVIDE THEIR I.T. BUDGETS Hardware purchases 15% IT Services or outsourcing 11% Research and development 3% Salaries and benefits 31% Applications 23% Everything else 17% INDUSTRY FINANCIALS Average year-over-year revenue change 17% Average year-over-year net income change 71% DATA: information RESEARCH
See year-over-year shifts in business-technology practices for this industry.
Compare and contrast this year's data with last year's.

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About the Author

Paul McDougall

Editor At Large, information

Paul McDougall is a former editor for information.

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