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Outlook 2004: Page 3 of 7

Henkel, which is among the top 100 suppliers to Wal-Mart Stores Inc., will make a significant IT investment this year to comply with the retailer's January 2005 deadline for pallet- and case-level shipments from its largest suppliers to be RFID-enabled. To that end, Henkel is implementing a warehouse-management system from Manhattan Associates Inc. to accelerate its wireless-tagging program. Although Henkel has been studying RFID for some time, it held back on full deployment until Wal-Mart issued more-specific directives to its suppliers in November.

Despite rising economic optimism, the view on IT budgets for this year hasn't changed much from the past two years, with 39% of survey respondents expressing a positive outlook on their companies' budgeting and spending plans, compared with 36% in 2003 and 34% in 2002.

At Sun Microsystems, optimism doesn't mean more dollars for IT. "The only budget increases we see now are for things that will save us money," says Bill Vass, Sun's VP of corporate software services. "It can appear that there's new spending internally, but it's more a matter of shifting the budget from one set of priorities to another--a zero-sum gain." Seventy-seven percent of executives surveyed cite reducing the cost of IT operations as a business priority for 2004.

Cost savings are often used to fund other, often mandatory, technology initiatives. A major investment that survey respondents anticipate this year is ensuring compliance with government regulations, with 41% expecting to spend more on those efforts this year than last and 78% indicating they plan to use IT in their compliance efforts. Among Sun's priorities for 2004 is compliance with the Sarbanes-Oxley Act (see story, "A Top Priority For 2004: Sarbanes-Oxley Compliance"). The company also plans to focus on cost cutting by continuing to replace PCs with thin-client systems, including home-workers' systems, consolidating server and software platforms, and improving security.

When looking at key business priorities for 2004, more than 90% of executives surveyed say they want to simplify or optimize businesses processes, and 83% want to gain a better return on their IT investments. Brian Bonner, CIO of semiconductor manufacturer Texas Instruments Inc., says that after seeing many projects fail to deliver on their promise in recent years, some companies will no longer engage in large projects that last multiple years, such as enterprise resource planning. "What we want today are very short projects with quick deliverables," Bonner says. "If there's a longer project, there need to be gates at which you can view a piece of it and ensure the project is headed in the right direction."