Comdex: ROI lessons learned from four CIOs

Computerworld - LAS VEGAS -- While other Comdex attendees were aisle-hopping for new gadgets, lining up for complimentary cappuccinos or receiving full body massages between conference sessions, a handful of visionary IT leaders were outlining steps their technology organizations have taken to deliver quantifiable business value during one of the most prolonged economic downturns in U.S. history.
Among them was Susan J. Unger, senior vice president and CIO at DaimlerChrysler Corp., in Auburn Hills, Mich. In January 2001, DaimlerChrysler implemented an enterprisewide material cost management system aimed at helping the automaker's 54 component teams share ideas about how best to streamline the number of common parts used among different vehicle lines.
Based on Lotus Notes, the system took less than one month to develop and roll out -- at a cost of less than $1 million -- and component team members are now using the system to conceive an average of 570 weekly "idea changes" to improve vehicles, Unger said.
So far the system has helped the carmaker cut the number of fog lamps used in various vehicles, saving $7 million. The material cost management system also helped winnow the number of seat structure components, which should lead to another $40 million in savings during the next two years. And it has flattened the number of powertrain controllers in the company's cars and trucks, yielding an additional $20 million per year in savings.
Unger called the ROI for the project "unbelievable."
The greatest praise Unger and her team could get took place this week when the company's 2003 IT budget was presented to senior management. Because she was busy speaking at Comdex, Unger didn't find out until later that DaimlerChrysler's unit heads for sales, finance, procurement and other departments "all said that we can't afford to cut the IT budget because of the business value we create."
Gregor Bailar has had similar success at Capital One Corp. Even though Capital One has been a leader among credit card issuers in its sophisticated use of data mining to identify new sales and cross-selling opportunities, the company decided several months ago to replace the bulk of its Hewlett-Packard Co./Oracle Corp. data warehousing platform with an NCR Corp./Teradata environment.
The reason: "Last year we did 64,000 tests on customer sets," ranging from evaluating how customers prefer to be contacted by Capital One to the creditworthiness of different sets of customers, said Bailar, CIO at the Richmond, Va.-based company. "For me, that's a ton of software transition."
After evaluating other data warehousing platforms, the company opted for Teradata, since it's better suited to pull together disparate data sets from customer tests into a single, integrated data warehousing environment, Bailar said.
The effort should significantly cut the amount of time company executives must wait for results on customer tests. Bailar estimated the investment in hardware and software for the platform swap at "tens of millions of dollars ... not $50 [million]," and said the data warehousing effort should deliver a two to three times ROI.
Wyndham International Inc.'s rollout of a centralized call accounting system last month has already contributed to cost savings and higher enrollment of its most profitable customers. In June, the Dallas-based hospitality giant began offering free telephone service for its "loyalty customers" -- including free long distance and local calls made within the U.S. -- during their stays at Wyndham properties, said Mark Hedley, senior vice president and chief technology officer at Wyndham.
The call accounting system serves several purposes. For starters, it helps front-desk clerks at each property identify loyalty customers while enabling the hotel to keep track of individual customer charges for costing purposes, said Hedley.
More important, the system appears to have helped enrollment zoom in Wyndham's loyalty program. Since June, the number of enrolled customers has grown from 330,000 to just over 1 million, said Hedley. Two years ago, Wyndham had just 25,000 loyalty members.
Wyndham's investment in the system has delivered other benefits. The $220,000 cost of software, hardware and deployment is expected to deliver $50,000 to $60,000 in annual maintenance savings for hardware and software that's no longer needed. Moreover, Wyndham's loyalty members typically spend 20% more than nonmembers during their stays. And according to Hedley, their propensity to stay at Wyndham properties is higher.
"More stays," he said, "means more cash to the bottom line."
Tim Stanley also knows a thing or two about leveraging technology to tap profitable customers. Stanley, who added the CIO title to his credentials this week, has helped Harrah's Entertainment Inc. squeeze as much profit as it can from its 26 million customers at its 26 properties nationwide.
Harrah's has installed a Teradata-based data warehouse that tracks customer gaming behavior at its casinos. It can then use the system to track the profitability of each customer during a stay at a hotel/casino, the type of marketing vehicle used to contact a customer, whether the invitation was redeemed, and when and where it was redeemed. The system can also show a 3-D view of each casino and which slot machines are generating the most traffic, using an infrared-type color-coding system that illustrates usage over elapsed time.
Thanks in part to its sophisticated use of data warehousing systems, Harrah's now generates 23% of its revenue as a result of using incentives to get customers to visit its various hotels and casinos. In addition, Stanley said that Harrah's share of the U.S. gaming market has risen from 36% to 42% during the past year.
That takes on additional significance considering that each market share percentage point gain represents another 20 cents to the company's earnings per share, said Stanley.