No one doubts that using information technology effectively has an impact on how well a business operates and,ultimately, how profitable it is.So shouldn’t certification as one of the 500 companies that use IT most effectively have not only an impact on acompany’s stock price, but a positive one?
Unfortunately, no.
Looking at the top three and bottomthree companies in the most recent Baseline 500 (Oct. 2007), it’s not apparentthat being named to the corporate IT pantheon had any consistent effect on thestock price of the companies involved.
If we didn’t have such an unswerving devotionto the IT community, that might make those of us who who spend weeks toting upnumbers under the hot glare of incandescent green desk lamps , blistering ourfingers with the pull-levers of our mechanical adding machines, feelirrelevant.
Luckily, one more reason isn’t necessary,and this one doesn’t really exist, according to Paul Strassman, an ITproductivity expert and former senior ITexecutive at Xerox, Kraft and NASA who did the principal analysis of Baseline500 companies last year.
Wall Street does look at how effectively a company uses IT,Strassman said, but they don’t always know what’s what they’re looking at.Procurement departments and manufacturing operations shift suppliers at thedrop of a hat ? usually moving internationally to find the best deal. In manycases, they would be unable to do that without a good technologyinfrastructure.
Analysts who look at operational efficiency are, in fact,judging effective IT, though they may never dig deep enough to hit the well ofIT acronyms, according to Chuck Pappalardo, managing director of SiliconValley-based recruiter Trilogy Search.
"There may be no direct correlation between how well acompany does in IT and how well its stock does," Pappalardo said."But when you really take a look at all the systems of the company, ifmarketing isn’t effective, it may be because it doesn’t have the information itneeds; if Wal-Mart runs well, it’s because they have business intelligence thattells them pop tarts sell better in a certain part of the country after astorm. It’s all IT, but people tend to put another label on it."
CEOs and other senior managers know exactly what label toput on it, however, and whether to include a pink slip, too. The pressure onCIOs to function as effective partners in a business ? not an internal servicebureau, not a discrete function to be aligned with business strategies ? is sogreat that CIOs who aren’t working actively at it are probably unemployed, orwill soon be, Strassman and Pappalardoagreed.
Luckily for most CIOs, though, themetrics that show them in a good light or a poor one do not depend on theday-to-day irrational exuberance of the market, or lack thereof.
So don’t take this correlation tooseriously, either for these companies or your own. But don’t fail to payattention, either.
Baseline 500 Top Three
1. Southern Copper Corp.
Baseline
2007 Sales: $3.76billion
Stock price
Stock price
Change: -38.6%
2. Chubb Corp.
Baseline
2007 Sales: $13.7billion
Stock price
Stock price
Change: -4.1%
3. Chesapeake Energy Corp.
Baseline
2007 Sales: $4.9billion
Stock price
Stock price
Change: +8.6 %
*Baseline
** Closing price first day of each month.
1. M&F Worldwide Corp.
Baseline
2007 Sales: $312million
Stock price
Stock price
Change: -49.4%
2. Metropolitan Health
Networks, Inc. 498
2007 Sales: $190million
Stock price
Stock price
Change: +7.3%
3. Crimson Exploration, Inc.
Baseline
2007 Sales: $17million
Stock price
Stock price
Change: -29.2%
***Consistent figures forNo. 499, Asiamart, Inc. not available. Trading price on Feb. 15 was 16 cents.