Every year, information technology is applied to a greater range of business processes.

Principal
among these is manufacturing, which was labeled a key beneficiary of information technology
by 47 percent of respondents (Figure 4.1). Following close behind is new product development,
which was cited by 37 percent of respondents. Interestingly, manufacturing and new product
development were numbers 1 and 2, respectively, in 1999, with nearly identical percentages in
2000. Manufacturing was the consistent choice among all respondent categories except
distributors.

[Figure 4.1 ILLUSTRATION OMITTED]

Unlike last year, however, manufacturing also was the consistent choice across all revenue
categories. In 1999 manufacturing was the runaway choice only for companies with revenues
less than $500 million. For the combination of all other size categories, endorsements for new
product development exceeded those for manufacturing. However, manufacturing is the leading
I/T function only for companies that spend 3 percent or less of corporate revenues on I/T. Those
spending more than 3 percent indicated that new product development was their number 1
preference. Perhaps those with greater I/T resources have an easier time acknowledging that I/T
can play a critical role in improving the product-development process by helping users broaden
their insight into consumer preferences, understand relative levels of product and customer
profitability, integrate design and development processes, and remove links from the supply
chain.

Also interesting is the ascension of quality management as the third most critical function toward
which I/T is being applied. In 1999 quality management ranked eighth, cited by less than 20
percent of respondents. This year, the percentage of respondents citing quality management was
50 percent greater. As high-powered initiatives such as Ford's "Customer Driven Six Sigma"
become more common, I/T is certain to be the linchpin for improvements in critical-defect
measurement and the enterprisewide storage/dissemination of quality information.

In the near future, readers should expect a similarly dramatic rise in technology applications in
procurement. Key drivers will be broader use (and therefore broader efficacy) of Net markets
such as e-STEEL, and increased OEM pressures to participate in Trade Exchanges -- for
unregulated goods with minimal engineering content, the Big 3's decision to join forces in
TradeEx (now called Covisint) will redefine the nature of supply chain relationships.

One positive finding is that respondents are somewhat more likely to indicate that their corporate
leaders view information technology as an investment rather than a cost. In 1999, responses were
evenly divided: a 50/50 split between cost and investment. Thus it is cause for some optimism
that more executives believe I/T has value: i.e., potential for payback.

Although meaningful correlations between cost/investment philosophy and company size cannot
be established, other findings reveal more about which respondents think "cost" and which ones
think "investment":
* Companies that spend more than 3 percent on I/T (as a percentage of revenue) are significantly
more likely to view I/T as an investment (79 percent investment vs. 21 percent cost) than
companies that spend less than 3 percent (57 percent investment vs. 43 percent cost).

* Respondents who stated that their company has an e-Business strategy were more than twice as
likely as those without an e-Business strategy to feel that their leaders view I/T as an investment.

* Tier 1 parts suppliers and Tier 2 systems suppliers were the only sectors to not cite
"investment" more frequently than "cost." Vehicle assemblers were the most likely to believe
that their executives support the investment perspective (82 percent).

In 1999, emissaries from the cost and investment side came together to cite "integrating
systems," "connecting to vendors, customers, or dealers," and "reengineering business processes
through I/T" as the activities/strategies most important to their organizations (Figure 4.2). These
three issues led again in 2000, albeit in a different order. As noted earlier, the common thread
appears to be connectivity: linking systems and supply chain partners and, when required,
redesigning business processes to enhance information flow. In fact, the thread may be stronger
than ever: Note the significant drop-off in support between the third-and fourth-most-cited
activities. It also can be inferred that "reengineering business processes through I/T" cannot be
accomplished without an organization structure (environment) that supports change and
investment in process analysis and improvement tools/techniques such as Six Sigma.

[Figures 4.2 ILLUSTRATION OMITTED]

Also illuminating is that, compared to 1999, even fewer respondents identified "cutting I/S costs"
as a key issue. Clearly this decrease tracks to the increasing number of respondents who view I/T
as an investment rather than a cost. Forward-thinking organizations focus on increased value.

Forward-thinking organizations also develop I/T strategies as well as business strategies.

Unfortunately, only 31 percent of respondents noted that their entity has developed a formal --
that is, written -- I/S strategic plan, i.e., a document that focuses on how I/T will help the
company realize key business goals and explores the role of key I/T resources and systems. This
figure is less than the 36 percent of 1999 respondents who stated that their entity has an I/S
strategic plan. However, company size has a tremendous bearing on the existence of an I/S
strategic plan: Survey results indicate that companies with revenues in excess of $500M actually
are more likely than not to have a formal I/S strategic plan (65 percent yes vs. 35 percent no). In
other words, the high number of respondents from companies with revenues under $500M
(whose likelihood of having an I/S plan is only 17 percent) fundamentally alters the question's
aggregate responses.

Interestingly, vehicle assemblers comprise the only industry sector that is more likely than not to
have an I/S strategic plan (73 percent yes vs. 27 percent no).

[Figures 4.3 ILLUSTRATION OMITTED]

Getting Closer to the Customer

This year's survey respondents identified "strengthen relationships with customers" as the best
reason to engage in e-Business. They also cited customer service as one of the most important
areas to apply e-Business capabilities. Clearly, respondents are saying that good customer service
is also good business. But what we've observed with OnStar is that, in an e-Context, exceptional
customer service means even better business.

As readers may know, OnStar is wireless communication technology, global (satellite)

positioning, a client-server architecture, and a network of call/data centers working together to
enhance driver safety, security, and convenience. With OnStar, our subscribers need not worry
about becoming lost, stranded, or even finding a hotel. Plus, OnStar can analyze vehicle
diagnostics, thereby increasing the driver's awareness of potential problems.

As our service offerings evolve, OnStar also will help GM understand how its products are being
used. This aggregated data will result in better services and better products over time, which
enhances customer loyalty. OnStar also may be part of a larger set of bundled products that
includes GMAC, car insurance, and the GM Card. In this context we're leveraging e-Capabilities
to grow the business in new directions.

The reality, however, is that OnStar is just one example of service innovation in a traditionally
product-focused business. Survey respondents know that great service pays. Now it's up to them
and their companies to introduce their own e-Service innovations to a highly receptive
marketplace.

Bruce Radloff is one of three "executive advisers" to this year's "Information Technology Issues
in the Automotive Industry" report. He oversees all information technology issues for General
Motors' highly successful OnStar division.