By Ari Nuncio
When it comes to technology, “innovative thinking and creativity will be a
must for executives in 1999,” says Oscar Morales, director of the Monterrey-based
consultant group Avraham Goldratt Institute. “The speed of change is increasing
Despite rough economic prospects, technology is continuing to play a dominant role
in the Mexican economy. Policymakers in business and government will sit down to
a veritable banquet of technology issues in 1999. There's the millennium bug, chronic
power shortages, under-utilization of available technologies (such as the Internet
and electronic mail), a lack of capital for new investment, and competitive pressures
that make qualitative advances in technology more necessary than ever.
But as financing dries up, spending on technology is one of the first budgets to
suffer. “In Mexico,” says Morales, “labor is cheaper than technology,
if quality is not an issue. Since the uncertainty of the markets will increase,
labor can be adjusted accordingly. Poor technology investments, though, once made
are not easy to recover without a loss.”
Aggravating the uncertainty, when the peso loses value, especially to the degree
it has recently, the price of foreign technology immediately shoots up.
Still, technology investments will keep growing “regardless of the difficulty
in obtaining financing,” Morales says, because “not doing so could mean
losing market share.” In the American Chamber of Commerce/Mexico strategies
survey, 85 percent of businesses polled reported “incorporating new technology
to confront increased competition.” Though keeping company systems up to speed
can imply daunting amounts of spending, the long-term savings are immense. The time
and paper saved by something as simple as e-mail is both monumental and unavoidable.
When billionaire investor Ricardo Salinas Pliego announced cutbacks last September
in the diverse companies he heads, his local telephone service provider Unefon axed
plans to install the business software application Systems, Applications and Products
in Data Processing (SAP). The Unefon unit was intended to serve as the pilot for
a comprehensive SAP system throughout Salinas Pliego's firms. Following a period
of cautious evaluation, though, management decided to reactivate the SAP plans for
retail unit Elektra, which company officials say represents the most important segment
of planned technology investment for the year.
“The programmed installation of SAP for Unefon was postponed, and the work
we had done was shifted over to Elektra,” says Elektra system planner Miguel
Alonso Sánchez. “You could say it was a creative way for Unefon's information
technology investment to be rescued for Elektra given the present financial climate.”
Though the bulk of Elektra's spending goes toward opening new stores, training personnel
and technology are the next two spending priorities, in that order. “SAP is
absolutely critical to our overall technology program; in fact it's the most important
of our technology goals for both 1998 and 1999,” Sánchez says. That's
why management found a way to keep the program alive for 1999, he adds.
SAP is already in use by a number of Mexico's largest firms, including Petróleos
Mexicanos (Pemex), Transportación Marítima Mexicana, Alfa and Femsa.
The American Chamber of Commerce/Mexico also sought flexible alternatives to keep
its technology program moving forward after management slashed its 1999 technology
budget in half in the face of a difficult year.
“We got imaginative,” says Director of Operations Mariana Prado. “We
purchased some of our needs with money from 1998's budget, we streamlined the training
program so each department would send one person who would then teach the rest of
their area, and we only postponed projects that weren't essential to our new technology
American Chamber of Commerce/Mexico spent over half-a-million dollars in 1998 to
develop a database system that overcomes the year 2000 dilemma and links the business
organization's wide-ranging departments and different branches into an integrated
database. “Fortunately most of the system was developed and will be installed
this year (1998),” says Prado. “That cost around 12.5 percent of our
annual revenue, but it is leveraging our efficiency, boosting internal productivity,
and above all serving our members at a much improved level, which will translate
into an expanded membership and higher revenues. In that way we expect the investment
to pay for itself over the next few years.”
Another Mexican firm investing in a technological overhaul is consulting firm Deloitte
& Touche: Galaz, Gómez, Morfín, Chavero and Yamazaki.
The company slated US$2.5 million to install SAP in its national and regional offices
starting in 1998, first driven by the need to bring its offices in compliance with
the millennium bug and later seeking to implement a cutting-edge system to provide
better service to its clients. Most of the SAP platform is now in place, but Deloitte
& Touche Director Javier Labrador says the firm is prepared to move ahead full-speed
in 1999 and finish the installation without any spending cuts. “We decided
that getting this project on-line would be one of our top priorities for the coming
year,” he says.
Despite next year's uncertain financial picture, technology experts expect more
re-engineering—especially in the service and manufacturing sectors. Enterprise-wide
technology revamps make up one of the main thrusts of the re-engineering trend,
a management movement calling for an in-depth rethinking of business strategy.
Generally, companies have two reasons to initiate a re-engineering process. One
has been dubbed “market push”: Market competition forces operational
changes. The second is “market pull”: Companies, anticipating promising
new markets, maneuver in a timely, competitive manner to stake out their share.
Few Mexican companies have had the resources to go through a complete re-engineering,
except for such heavyweights as steel giant Altos Hornos de México, top industrial
firm Vitro's Flat Glass Division, textile leader Grupo Covarra, and entertainment
king Grupo ECE. In most cases, the focus was on automating three areas: production
planning and programming, order entry processes, and financial planning.
Looking ahead, several factors point to a generalized slowdown, worldwide, in technology
purchases. Ricardo Zermeño, director of electronic strategy for technology
consultants IDC-Select, predicts a significant slackening in Mexico's 1998 technology
sales and more of the same for 1999. Annualized growth in PC sales is hovering at
about 3.5 percent versus 15 percent in previous years.
A few companies have already invested heavily in technology and now are reaping
the rewards. The rest face a hard reality: It takes money to make money. Technological
progress costs money now, but leads to long-term efficiency and savings that help
any company better weather financial down turns—something firms that operate
in Mexico are well used to by now.