WAL-MART: TECHNOLOGY PAYBACK IS IMPERATIVE

DENISE POWER

NEW ORLEANS -- Dangerous trends are taking shape in the world of information technology, and much of the blame falls squarely on the shoulders of retail chief information officers who continue to tolerate poor business practices both within their own companies, and from the vendors who provide technology solutions.

Technology executives who have allowed themselves to become "order takers," rather than leaders who insist on project investment payback, are responsible for the too-frequent technology project failures and massive cost overruns that plague retail, said Kevin Turner, vice president, applications development, Wal-Mart Stores.

Approximately 33% of all development projects are canceled prior to completion, Turner said during a keynote presentation at the Retail Systems 98 conference, held here June 15-18 and sponsored by Retail Systems Alert Group, Newton Upper Falls, Mass. Among those technology projects that are completed, 56% have cost overruns that average 189% of the project's estimated price tag.

"These are incredible numbers. Extremely alarming," Turner said. "Less and less of information-technology dollars are going toward supporting income-producing work."

A company's failure to demand a return on investment for every technology project undertaken is chiefly responsible for project cancellations and cost overruns, he said. Companies have become too complacent about missed implementation deadlines, and productivity isn't keeping pace with the rapidly rising salaries of technology staffs.

"We're not talking enough about how do we pay our way -- how do we turn ourselves from an expense division to a profit center," Turner explained. "One of the problems is that a lot of companies don't require an ROI except for major purchases.

"At Wal-Mart, everything has to pay its way, even infrastructure [investments]. A lot of people say you can't cost-justify infrastructure, but you can. There is a way. You have to make ROI the center of what you're about, to begin to pay your way."

There are two primary "disconnects" that repeatedly sabotage technology initiatives and their contribution to the bottom line, Turner said. One divide exists between a retailer's technology department and the various business units it supports; the other disconnect is between information-technology (IT) departments and the vendor community providing technology solutions.

"We couldn't do what we do without our technology providers. Anybody will agree with that," Turner said. "But the time has come to band together, sing the Coke song and everybody put pressure on these [vendor] folks to provide solutions that we can all implement, not technology looking for a solution."

He said retail technology executives, overeager to latch onto the next big technology development, invest too quickly in unproven technologies. Too often, the result is vendors made even richer -- on the backs of failed IT projects.

"None of our jobs are safe if we invest in things that aren't real," Turner warned. "We need to break that cycle."

Another fence in need of mending is the disconnect that exists between a company's IT department and the business units it serves. Turner said IT executives must be willing to ruffle a few feathers and initiate changes in business processes, when appropriate.

"We need to bring changes to the business unit folks," he added. "Are we always going to be right? No. But if we're driving the change, we're better prepared to swim upstream and not go over Niagara Falls" when obstacles arise.

Turner described how Wal-Mart's insistence that all technology projects deliver an ROI also serves to ensure that business objectives and technology solutions are sufficiently aligned.

The retailer puts all technology payback figures in writing, which in turn requires the affected business units to acknowledge savings and work them into their business plan -- or dispute the savings and work with the IT department toward a resolution.

"We do a quarterly report on every project," Truner noted. "We talk about real numbers, and when you put payback on paper and show it to the CEO, what does he do with it? He immediately calls the business unit up and says, 'Show me, on your P&L, where you've got this savings.' And the battle begins."

Putting payback on paper forces the matter to be resolved, one way or another. "Do the [business units] always agree with us? No. Will they work with us? Yes. If they don't, we won't do anything more for them in the future. And I'll tell you, that works," said Turner.