Where Circuit City, Jet Blue Plan To Spend Next Year

Interestingly, Michael Sade, director of acquisition management and procurement, executive office of the Secretary, U.S. Department of Commerce, pointed out that while his department has to take into account trade agreements and the Buy American Act that encourages certain percentages of goods to be procured from the United States, foreign-made PCs would not be a major issue. The impact ultimately would be "minimal," coming down to how to buy certain products, such as PCs, even those from China. And as his department moves to a more service-oriented architecture, Sade said he sees no problem with letting someone else own the desktop. In other words, procuring PCs as part of larger service agreements for technology from, say, solution providers would circumvent the issue.

The panel, moderated by Bob Faletra, president of CMP Media's Channel Group, also included Michael Jones, senior vice president and CIO of Circuit City, and Todd Thompson, vice president of information technology at Jet Blue Airways.

In terms of IT spending for 2005, the panel concurred that spending is on the rise. Jet Blue's Thompson said while the overall airline industry is struggling and not spending as much on IT in general, his situation is unique in that his spending is increasing. Because Jet Blue is such a new company -- the low-cost alternative airline first took flight in 2000 -- it doesn't have legacy systems to maintain and can put more of its IT dollars toward new projects. In fact, Thompson said that 75 percent of his IT spend is on new projects.

In all, Thompson's IT spend is about 3 percent of the company's revenue, amounting to approximately $50 million. For the most part, Thompson explained that he's focused on investments that improve the customer experience, concentrating on self-service technology, such as airport kiosks and providing better information to flight crews for more efficiency.

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Circuit City's Jones, on the other hand, spent about $150 million to $200 million on IT in the past year. His IT department sees a 60-40 split between spending on new projects and maintenance. Jones is currently focused on a major transformation project that has so far been five years in the making.

The electronics giant has turned to IBM to help roll out an entirely new POS system, including new hardware and software, to more than 600 stores. The system will be based on IBM's SurePOS 300 systems and will run on the Linux operating system. In addition, Jones pointed to spending on the merchandising and supply-chain areas in the coming years.

Circuit City's previous IT attitude has seen an about-face in recent years, from a highly customized, complex technology shop to a less customized, more off-the-shelf technology focus, Jones said.

Sade, meanwhile, estimated spending about 25 percent of his $6 billion annual budget on IT. "We collect and disseminate data -- that's what we do, so IT is very important," he said, and he sees that spending continuing to increase "a couple of points over the next three years."

So where is that spending going to take place? On the retail side, RFID is obviously something that Jones is knee-deep in evaluating and debating. Jones said that while he "loves it," down the road no one will remember who deployed RFID first, so he's more interested in how RFID can improve the customer experience. In other words, he's paying attention to what Wal-Mart is doing and is gung-ho on the technology, but he views the real value in RFID for customer-facing aspects, gathering data or tracking to improve their experience at the stores.

He added that there were still some inhibitors to widespread RFID adoption -- the read rates need to go up and the costs still need to come down. In addition, he said there are some issues around products that are shrink-wrapped or in metal casing and the RFID readings. Regardless, Jones said he realizes that broad use of RFID will require business-process changes, and he sees doing that "in conjunction with someone when it makes sense."

Storage, in particular, was something that all three execs were going to continue to spend on. Sade said that on his end, storage requirements continue to increase, and the need for storage is always on the rise. For example, the National Weather Service is in the process of automating its old weather records, which will allow them to build better weather models but requires more storage. In the storage area, Sade also pointed out that blade technology was going to be big.

Jet Blue's Thompson also sees his spending on storage increasing as his company looks to do more with disaster recovery and preparedness. He also sees server virtualization and consolidation as driving the technology refresh in the data center, in addition to the rise of server consolidation, especially as performance increases and cost decreases in the storage arena.