Will Tablets Take Off?

Mobile computing continues to be a hotbed of innovation, but meanwhile a would-be Wi-Fi giant calls it quits. Also: Sorting out the CIO reporting r...
CFO StaffJune 15, 2004

Americans may be a sedentary lot, but not, it seems, at work. How else to explain the many efforts computer companies are making to satisfy the needs of the “mobile workforce”? Laptops and PDAs continue to shrink and get more powerful, cell phones are turning into multifunction devices, and tablet computing continues to attract new players along with the substantial efforts of old ones.

This summer, Microsoft will release a new version of the Windows operating system it developed expressly for tablet computers, one that promises a number of improvements to the tablet’s ability to “understand” handwriting and otherwise deal with pen-based input in more user-friendly ways (such as allowing handwritten notes to be embedded in Word documents and other applications). And new entrants to the tablet field will soon introduce cheaper, more-powerful machines that may essentially eliminate the premium that customers currently pay for the ability to use a pen as an input device and enjoy the greater portability of tablets.

Tablet computers come in two forms: slates, which have no keyboard and rely on a penlike pointer for input (think UPS delivery guy), and “convertibles,” which have a detachable keyboard and are often dockable on a desktop, making them particularly versatile but usually heavier than slates.

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While tablet sales are currently dominated by familiar names (Toshiba, Hewlett-Packard, Acer, and others), new companies hope to make a mark. Averatec will soon unveil a convertible model complete with optical disk drive and built-in wireless capabilities for $1,299. Motion Computing specializes in slate computers aimed at “highly mobile professionals” who need to walk and compute at the same time; field inspectors, health workers, and government employees are among its primary markets. Xybernaut Corp. builds tabletlike functionality into its arsenal of “wearable” computers; in one such application, an Irish company called Adwalker equips its marketing reps with computers and flat-panel touch-screen monitors and sends them out to music festivals and the like, where they conduct research, dispense coupons and other information, and provide an “out-of-home” customer experience to anyone lucky enough to encounter this mobile marvel.

Despite those new frontiers, tablet sales haven’t taken off, but the market may get a boost should a rumored Apple model appear later this year.

Ironically, pundits suggest that such a device, aimed at consumers, would allow them to control an array of home electronics without having to leave the couch.

CIOs a la Chart

Counterintuitive factoid of the day: CIOs at small companies now tend to report more often to the CEO, while at large companies it’s an org-chart dead heat between reporting to the CEO and the CFO. A recent survey conducted by the Society for Information Management (SIM), a professional organization made up primarily of CIOs, found that at large companies (defined as having revenue of more than $1 billion) the CIO reports to the CEO at 41 percent and to the CFO at 36 percent, with the COO emerging as the CIO’s boss 11 percent of the time and various other executives accounting for the rest.

Those figures, SIM says, have been consistent for the past two years. But the most-recent survey found that at companies with under $1 billion in revenue, the CIO reports to the CEO at a surprising 55 percent of responding companies, and to the CFO at 23 percent. Two years ago, the CEO and CFO were equally likely to be the CIO’s boss, at 41 percent each.

But Financial Executives International (FEI) found the opposite: in very large companies (revenue of more than $5 billion) the CIO reports to the CEO 60 percent of the time, while in companies under $1 billion, reporting to the CFO is the most common arrangement, with most respondents anticipating no change. The FEI survey base was substantially larger, with more than 600 responses.

Meanwhile, The Hackett Group says that CIOs report to the CFO at 26 percent of companies.

We’ll keep looking into it.

A Wi-Fi Bye-Bye

The combined muscle of IBM, Intel, and AT&T proved no match for free service, so last month the would-be Wi-Fi giant Cometa Networks announced it was shutting down. The joint venture had been built around the premise that a nationwide network of Wi-Fi “hot spots” (transmission sites that give users of wireless devices high-speed access to the Internet as long as they are within a few hundred feet of a transmitter) would become a new (and profitable) form of telecom infrastructure. But with Starbucks and other companies offering clients free use of hot spots, winning paying customers has proven difficult.

Even with free access to hot spots, which now number more than 40,000 nationwide, Wi-Fi usage has not taken off. Research firm In-Stat/MDR surveyed business travelers at the end of last year and found that the availability of Wi-Fi or other high-speed Internet connectivity (such as the wired services offered by many hotels) would influence their choice of where to stay or visit — but only if the service were free. The average monthly fee paid by survey respondents for some sort of “visitor-based network” was a mere $12.10. Jasbir Singh, president of Pronto Networks, says Cometa’s demise owes more to its failure to build a big enough network fast enough. “They simply ran out of cash,” he says, “but this won’t affect the Wi-Fi market as a whole.”

Where the CFO Would Like to Be

Many CFOs wish they were someplace else — namely, the corner office, if not as the full-time inhabitant then at least as a frequent visitor. That is, they’d like to spend more time advising the CEO on long-term strategy and less time analyzing costs, metrics, and the like.

So says a survey by CFO Research Services and Geac Corp., which polled 140 senior finance execs across all industries on the topic of how they and their finance teams contribute to business strategy. While only 40 percent say they do, in fact, play that senior advisory role, nearly two-thirds hope to do so within two years. To free up that time, they’d like to spend less effort on costs, expenses, profitability measures, and the analysis that goes along with them.

But what sort of planning and advising would they like to do? Asked about their ability to create a plan to pursue promising opportunities, more than 40 percent rate their capabilities as “high” in the area of cost control, while approximately 34 percent give themselves that grade for organic growth and only 26 percent claim that status in the area of alliances/mergers and acquisitions.

Maybe it’s a matter of practice: fewer than 10 percent say they spend too much time on strategic planning, while more than half say they don’t spend enough.

Words Fail Them

Even though computer security remains a rare growth area within IT budgets, the purse strings are tightening. And, according to Yankee Group, security budgets are becoming more influenced by lines of business, rather than being solely determined by IT departments. Consulting firm Meta Group goes a step further, arguing that today’s hodgepodge of security expenditures (antivirus software here, firewall protection there, data-privacy efforts somewhere else) will ultimately be consolidated into strategic programs with dedicated budgets. But for that to happen, security professionals need to articulate the business case for higher security spending better than they have to date. Quantifying the benefits of a disaster that never happens is a tall order, so putting a dollar value on security spending may be impossible. But Meta Group analyst Tom Scholtz proposes a “4i” model as a way to frame security-budget discussions.

In his view, the i’s that have it (the power of persuasion, that is) are investment, integrity, insurance, and indemnity. Investment would stress everything from brand enhancement (or, more to the point, tarnishing) and competitive differentiation to agility and adaptability. Integrity would stress continuous availability and accurate information. Insurance would frame security spending in risk-management terms, while indemnity would stress new regulatory requirements and governance practices. The aim is not to wrest as large a budget as possible from an executive audience, but to frame the issue in terms that business leaders are comfortable with. Scholtz also recommends that companies look at the cost of past virus attacks, fraud, hacker attacks, and other security lapses as one way to put some hard numbers on a line item that defies easy analysis.

No News Is Good

If, as Mercer Human Resource Consulting maintains, a company’s intranet is a mirror of the organization, you may not like what you see. Intranets were supposed to be inexpensive, efficient ways to get all employees on the same home page, kept abreast of company information, given access to corporate policies and benefits forms, and generally supplant any need to stroll down to HR or hang out at the water cooler. But Mercer and others say intranets have become mired in mismanagement, having become dumping grounds for outdated or irrelevant information and biased toward some departments while ignoring others.

Mercer proposes a multistep improvement program, including creating a strategy based on users’ needs, revamping the architecture and content-creation mechanisms to meet those needs, obtaining good usage data, jazzing up the visual appeal, providing access from anywhere, and integrating the intranet with other company communication channels. Nielsen Norman Group, a usability consultancy, says good intranets now downplay access to news (particularly outside news — can your intranet really compete with a daily newspaper?) in favor of providing access to tools that help employees do their jobs better.

Better Numbers, Eventually

Just one year ago, according to research by The Hackett Group, only 9 percent of companies said they had confidence in their financial forecasts and reporting outputs. Now, thanks to the demands of the Sarbanes-Oxley Act of 2002, that figure is up to 67 percent.

Good news, but it comes at a price: for the first time in years, companies have been largely unable to reduce overall finance costs. Meanwhile, monthly closing cycles have actually grown longer. From 1992 to 2002, Hackett found, the typical company in its survey base was able to cut the percent of revenue consumed by the finance department by 58 percent, to 1.08 percent of revenue. But that figure has remained essentially unchanged for the past two years.

Hackett labels as “world-class” those companies that score in the top 25 percent in both efficiency and effectiveness output metrics in a given functional area. World-class companies differ from their peers in many respects, including the use of IT, with world-class companies far more likely to rely on a central data repository to generate performance reports, and to use integrated budgeting/planning software and online tools that provide employees with a self-service system for ad hoc queries and financial reports. They also spend more on IT (30 percent more, on average) and tend to consolidate on a single ERP system.

Budgets Budge, a Little

With 2004 budget cycles now under way, IT leaders say they will spend more this year than they projected at the end of 2003. A little more, anyway. According to a Forrester Research survey of almost 900 North American companies, IT spending will be up 2.4 percent this year over last. Companies had predicted only a 1.7 percent average increase as 2003 wound down, but higher spending by finance and insurance companies, as well as retail and media firms, raised the overall average. Those industries raised IT budgets by 4 percent, while, at the opposite end, manufacturers raised them by a mere 0.1 percent. Enterprise portal software topped the list of technologies most likely to benefit from increased IT spending, followed by wireless networks and content-management software.

A survey conducted in March by Financial Executives International and Duke University’s Fuqua School of Business found that 75 percent of companies plan to increase IT spending, with the average increase pegged at 4 percent. Capital spending will rise by an average of 11 percent, so IT expenses are clearly still under pressure.

Terrible Things to Waste

While improving PC sales (see the related story that follows) are good news for the companies that make them, what about the rest of us? For every new machine being unpacked at work or at home, an old one may be headed for the trash. That adds up — to a toxic mess. So much so, in fact, that the Silicon Valley Toxics Coalition continues to sound the alarm about the environmental impact of all those old boxes and monitors.

The group issued its most recent Computer Takeback Campaign report card last month, and it’s clear that grade inflation is not a problem. Computer companies were clustered into four groups: beginners, trailers, “still at the starting gate,” and benchwarmers. Hewlett-Packard, Dell, and NEC qualified as beginners, the highest grade awarded, because they address multiple aspects of the environmental threat (first-place HP), or have launched new recycling programs (second-place Dell, which climbed from last place), or have worked to reduce toxic chemicals (third-place NEC). As the report card was released, both HP and Dell announced they would do more to foster recycling efforts and absorb a greater share of the costs. The issue is complicated by differing state laws and such issues as who, ultimately, should pay: makers of new machines or makers of the machines being discarded — a major issue as market share shifts away from some companies, such as IBM, and toward companies like Dell.

The trailers include IBM, Sony, Toshiba, Apple, Philips, and Lexmark. Many of the remaining companies received failing grades last year and refused to participate this year, although Gateway and eMachines said they are developing recycling programs.

Has the PC War Been Won?

Even as PC companies cope with environmental concerns, they have other battles to fight; namely, the one for market supremacy. As one sign of how difficult that fight can be, consider Dell: the company saw its revenue rise a remarkable 22 percent for the quarter ended April 30, but concern over its shrinking profit margins (from 18.3 percent in the same quarter last year to 18 percent this year) caused its stock to fall by about 3 percent.

However, says market research firm Techtel Corp., “Dell has won the war for PCs” in the business sector. Market-share stats bear that out, with Dell commanding 18.6 percent to Hewlett-Packard’s 15.6 percent, according to an April report from IDC.

Will the battle now shift to printers? Dell CFO Jim Schneider says the company’s nascent printer business, a partnership with Lexmark, has been “stronger than anticipated,” although HP remains the overwhelming market leader. Printers are a profitable business primarily because of the high markup on replacement cartridges, and Schneider says Dell was pleased to see that one in four printer buyers opts for an additional ink cartridge.

Is the digital age financed by high-priced ink? Maybe we should be thankful that the “paperless office” has yet to materialize.

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