IT vendor marketing falling on deaf ears in the manufacturing sector

A survey of 150 of the top 300 global manufacturers, conducted by independent market analyst Datamonitor (DTM.L), to investigate current issues and IT opportunities in the manufacturing industry in North America and Europe, finds that one in four plan to increase their IT budget in 2005. However the report, "Global Manufacturing Outlook and IT Investment Insight - A Datamonitor Technology Decision-maker Panel project," also reveals that manufacturers are less than impressed by the latest IT industry buzzwords like on-demand, grid and utility computing - the solutions which IT vendors are pushing. "Manufacturers don't understand how these address their business needs or help to improve processes. Vendors are failing to effectively communicate their use and business benefits," say Richard Clifford and Miriam Morath, Datamonitor technology analysts and authors of the report. "Vendors must re-think their strategies. Speed is of the essence."

Manufacturers - less than impressed by the latest IT industry buzzwords

Datamonitor's survey of C-Level executives, CIOs, IT managers and line of business (LOB) managers investigated current issues and opportunities in the manufacturing sector, spanning general economic and business issues, core technologies (such as ERP, CRM, SCM and PLM) and new technology paradigms (such as on-demand, grid & utility computing, RFID, business agility and lean manufacturing).

IT vendors are pushing on-demand, utility and grid computing solutions but manufacturers do not see how these solutions address their business needs and help them improve their business processes. Asked about new technology strategies and paradigms, it is clear that manufacturers are not interested in grid, on-demand and utility computing. Over 75% of manufacturers say grid computing is not relevant to any stage of their product lifecycle. More than 80% of manufacturers state utility computing is not of any use in resource planning and supply chain execution. More than 90% have no intention to invest in on-demand capabilities across the production process.

This lack of interest is especially worrying for IT vendors given that manufacturers are very confident about their business and the development of the economy. 25% even indicated that they will increase their IT budget over the next 12 months.

"IT vendors need to spend more time making clear the business benefits that solutions of this sort can have - through the use of sub-vertical and business function-specific qualitative case studies and quantitative ROI metrics," says Clifford.

Manufacturers' IT focus is on traditional solutions, such as enterprise resource planning (ERP) and customer relationship management (CRM)

Manufacturers are only now beginning to realize the importance of creating a consistent IT environment in order to operate a fully efficient, integrated IT environment. Indeed, creating a consistent IT environment is cited as a priority for manufacturers in the coming 12 months. This was not the case when the survey was conducted in 2004. Then, IT investment was still being made on a short-term basis, with tactical (as opposed to strategic) aims in mind. 28% of the manufacturers in the 2005 survey feel they are in a better position than 12 months ago and 65% think the business climate will improve.

So the news is good for IT vendors. However, from an IT perspective, focus in the manufacturing sector is more on traditional solutions like ERP and CRM upgrades and IT consolidation - those solutions that have the ability to improve key business functions such as supply chain planning, capacity planning, procurement, contract management and compliance, asset management, plant floor communications, plant safety, warehouse management and logistics management, to name a few.

Clifford concludes:

"IT vendors, particularly the likes of HP, IBM, Microsoft and Oracle, have to re-consider their strategies when addressing the manufacturing sector. This study has demonstrated a willingness by manufacturers to invest but vendors must meet the needs of the sector. As it currently stands, there is a complete disconnect between IT vendors and the customers they are trying to serve."