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But companies are still opening their wallets whenever they are confident that they will see a return on their investment within a year or two. A Merrill Lynch survey of 70 chief information officers this year found that they expected their IT budgets to grow 9%. That's less than when the economy was soaring, but it's more than most companies will be hiking expenditures in other areas.
Among the strongest sellers today are products that help companies store and use data more efficiently, manage supply chains and inventory better, meet the needs of their best customers and find new customers on auction sites. The leader in customer-relationship-management software, Siebel Systems, of San Mateo, Calif., for example, is helping Farmers Insurance claims officers access information about a customer's policy and claim from the field. Software firm Blue Martini, also based in San Mateo, allows Saks Fifth Avenue to identify and better serve its most profitable customers and prospects. Companies as large as Sun Microsystems and as small as antique-jewelry shops are finding that eBay and other auction sites provide a ready-made distribution channel. And an array of online auction-management companies, like GoTo.com and AuctionWatch, report rising demand.
Every vendor company has client success stories. i2 contends that its 9,000 implementations of e-business software around the world have produced some $16 billion in growth and cost savings to its clients. But more disinterested observers have also weighed in. IDC, a firm in Framingham, Mass., that analyzes IT trends, has found, for example, that the Enterprise Storage Network, pioneered by storage giant EMC, typically reduces costs 40% below those of conventional decentralized data storage. In the old setup, a single IT manager can handle no more than 200 gigabytes of data, IDC found. With Enterprise Storage, the same manager can handle 750 gigabytes. That leads to greater efficiency for each employee and substantial savings in salaries.
International Paper, with nearly 200,000 employees in 50 countries, today stores on computers some 25 terabytes of data--about factory operations, customers, suppliers, you name it. If printed, those data would fill 2,500 pickup trucks. Not long ago, International Paper's 191 IT technicians were spending nearly half their time manually backing up data.
Then, in 1999, International Paper decided to invest in instant backup systems provided by EMC, based in Hopkinton, Mass. The systems have significantly cut labor costs. "We've been able to reduce some of our daily backup routines to 15 minutes, from 10 hours before," says Stephen Schaefgen, director of information at International Paper's Memphis, Tenn., operations center. "Critical customer and product information is available for decision making more often," says Schaefgen.
Such investments are not just for big companies. Tropian, a 90-employee wireless communications company based in Cupertino, Calif., used to handle its purchase orders through what it called "SneakerNet." "You typed out the purchase order and you printed it, then you ran around the building looking for your boss or your boss's boss," says vice president of operations Marshall Wilder.