Overview: Excellence On A BudgetOverview: Excellence On A Budget

It's a sign of the times, however, that companies champion even the newest technology in pursuit of budget-trimming, rather than new features for users. Of the 89% of information 500 companies using XML and Web services in production or testing, four in five say their goals include faster, cheaper integration of data, and nearly three-quarters seek operational savings or the ability to ax some computing platforms. Three-quarters of companies say they're live with Web-services projects, and another quarter are testing the technology. Fewer sites, though, use XML for data exchanges with customers or suppliers: 64% this year, down from 75% last year.

The most popular technologies among companies on the list this year include data-warehousing software (cited as widely deployed by 95% of companies), Windows 2000 PCs and servers (named by 95% and 82% of respondents, respectively), Java-based apps (93%), and enterprise-resource-planning software (92%). One big reason for deploying these technologies is the ability to share information more quickly within and among companies. "The banner for us is information integration," says Roy Dunbar, CIO and VP of IT at Eli Lilly & Co. "This dictates which technology we use, the extent to which it's customized, and the extent to which it's used globally." Customer-relationship-management software plays a big role in this integration as Lilly, like most drugmakers, searches for the most effective way to market and sell medications to an increasingly savvy customer base that has several choices for just about any ailment.

CRM is also a priority at drugmaker Wyeth. The company's goal is to better target sales calls by understanding not just how many prescriptions a physician writes, but what kinds. "If Wyeth has a product that addresses a particular condition, we want to avoid calling on a physician who doesn't see patients with the problem that that drug treats," CIO and VP Bruce Fadem says.

Some 41% of information 500 companies say they've taken measures to share real-time data about their operations with employees and external users. Another 36% share such information just with insiders. Thirty-five percent say their white-collar workers use business-intelligence tools such as online analytical processing or data mining, up from 32% of companies last year. "There's more and more demand for real-time, dynamic information," says Jackie Barretta, VP of IS at Con-Way Transportation Services, a $2 billion-a-year trucking unit of CNF Inc. Previously, Con-Way's IT department built software to answer business questions using "canned" daily reports. Now, in a more competitive market, making the best bids requires less formula and more customization, eased by new software that complements old Cobol code with Java. "Customers are doing a lot more competitive shopping," Barretta says.

information 500 companies are relatively well-armed against the security threats making ever more frequent appearances: 98% report using antivirus software, and 84% run intrusion-detection systems. But sophisticated safeguards for users are rarer: Only half of companies employ one-time passwords, access tokens, or smart cards, and just 10% of sites use biometric techniques.

One area where companies aren't spending is on personnel. They're reluctant to add workers, yet they're trying to squeeze more productivity out of the ones they have--even while cutting back on outside help such as temp workers and consultants. Just over three-quarters of information 500 companies say they used temp workers or IT contractors this year, compared with 84% last year and a whopping 94% in 2001. Yet just 4% say they expect hiring to increase significantly in the next year, though more than one-quarter expect some increase. Nearly half the companies say they expect no change in staffing levels, and 19% say they plan to hand out pink slips. DaimlerChrysler expects to continue hiring college grads for IT jobs, CIO Unger says. But the company isn't bringing more highly paid technicians on staff. "We get more experienced talent through consultants," she says.

Overall, though, outside help is falling out of favor. While IT budget money earmarked for salaries and benefits rose by 4% over last year, to an average of $113.2 million, money spent on consultants and outsourcers declined 3%, to $51.7 million on average. Companies spent nearly 32% of their IT budgets on salaries and benefits during the past 12 months, up from 28% last year, and about 15% on consulting and outsourcing, versus 18% in 2002.

Washington Mutual, a $19 billion-a-year bank, has developed its internal IT expertise at the same time it's built a new company network and upgraded 50,000 PCs, all funded by an IT budget increase of less than 5%, says executive VP and CIO Jerry Gross. The company is relying more on its own employees--IT staffers get 40 hours of training a year--and less on service providers to manage its wide area network. "We have more focus on owning what we're building so the intellectual property is Washington Mutual's," Gross says.

It's out with the consultants at PeopleSoft Inc. as well, says David Thompson, senior VP and CIO. The software company, which is fending off a hostile takeover bid from Oracle, is installing more servers to host its applications and generate revenue, in spite of an unchanged IT budget, by renegotiating telecom contracts and cutting down on consulting. Yet PeopleSoft also revealed last month that it would lay off up to 1,000 workers next year as part of a $150 million to $200 million cost-savings plan following its acquisition of J.D. Edwards & Co.

Even as they're stripping away perks from the boom days of 2000, such as telecommuting and stock-option awards, information 500 companies are giving workers more laptops, handhelds, and cell phones, replacing worn PCs, and upgrading networks in an effort to extract more productivity from IT staff. Sun Microsystems' pursuit of lower staffing costs may be extraordinary by any measure. Some 15,000 employees at the computer maker, including the CIO, don't have permanent workspaces. "I don't have an office," says Bill Howard, senior VP and CIO. "But my admin does."

Howard estimates "hotelling" saved Sun about $65 million last year, plus another $4 million in power costs. By next month, the company plans to offer users an online session to access their files from anywhere in the world. "All the books that I used to have in the office that I never looked at are now at home," Howard says. It's a plan that's indicative of a period when innovation means cutting back as well as doing more.

--With John Foley and Larry Greenemeier

Illustrations by Christoph Hitz