Fixing America’s Aging Technology Infrastructure

Coping with Costs
While most participants agreed that digitalization has enormous potential, many business leaders expressed frustration about navigating implementation and justifying the cost. Those leading private companies pointed out that owners sometimes have unrealistic expectations for a return on capital investments.

“You can’t buy anything for a six-month ROI,” said one CEO. For others, the price tag simply seems too high. “I’d love to have a completely automated system— design it, model it and push the button and it goes,” reported David Price, CEO of Brown Industries, which builds top quality van bodies, trailers, rail equipment and custom vehicles. “But we haven’t found the right people who can come in and do it cheaper than we can here with low-cost labor. We only build 800 trucks a year, three or four a day, each one different. For all the programming required by every different type of truck, you would need a full team of staff spending more man hours programming than I think you would actually building the truck.”

The pressure on public companies to perform in the short term is also an issue, noted John Leonardi, president of Foth Production Solutions. “Publicly held organizations tend to spend a little less [on capital investments] and use more Band-Aids,” he said. “The smaller privately held companies might actually spend a little more automating because they don’t have the pressure of the shareholders.”

The cost barrier, however, is coming down. “It’s off-the-shelf technology,” noted Batra. “I see golf ball manufacturers digitalizing.” Furthermore, research suggests that American manufacturers are well aware of the need to invest in updating and upgrading facilities. Results of a recent study by the Manufacturing Institute showed that about 20 percent of companies expect to spend more than 40 percent of their operating budgets on capital expenditures over the next five years to bring old machinery up to speed.

Another recent survey reported that while on 19 percent of respondents were currently using Big Data to increase decision quality in the manufacturing process, 70 percent were interested in doing so.

Clearly, most business leaders see transformation as inevitable—more a matter of when than if. “We know there’s going to be huge value created,” summed up Doug Bellin, global senior manager of manufacturing at Cisco Systems. “But where do we start? I can’t redo the whole plants so what can we do to add some things to it? It’s that old saying—how do you eat the elephant? One bite at a time. Which bite do you start with? That’s the hard part.”