Leadership

How to recession-proof IT

In the current economic environment, IT is well positioned to make a compelling case for strategic spending that can help weather the storm.

The pundits who have long been predicting an economic slowdown are finally having their day in the sun and, as if having won some macabre bet, can be found gloating in the "victory" of an economic down cycle. The news has already affected the IT industry, with CIOs speaking of shrinking budgets, and talk of abandoning or limiting new projects. CFOs with their eyes on the till need only glance at corporate spending to realize most IT shops are behemoths on the spending front, talk of which sends their IT counterpart scurrying in fear. One gets the sense that CIOs are shrinking back into their office, to quietly trim away costs and live by the admonishment to do more with less, the hallmark of IT after the Internet bust of the early 2000's.

While an economic recession certainly slows spending across the board, it does not eliminate it and, somewhat counter intuitively, many companies are looking for investments that can effectively demonstrate their ability to generate returns, cut costs, or some combination of the two. Everyone from C-suite colleagues to vendors are more willing to listen to and evaluate a high-quality proposal rather than rushing to and fro, chasing the Next Big Thing. In this environment, IT is well positioned to make a compelling case for strategic spending that can help weather the current economic storm.

A recession is not just about cost cutting

Traditional wisdom that suggests retrenching during a recession, and waiting under a rock until happy days return is not always the best advice, especially in IT organizations that have already spent years trimming staff and budgets. By and large, many IT organizations have cut their "low lying fruit" on the spending front, and significant costly effort must be spent to implement further cuts creating a case of spending a dollar to save a dime. While it's easy to look at cutting back as a solution to economic woes, the opposite strategy might be just be what your organization needs.

As others cower in fear, openings appear in the competitive landscape that can be exploited by the bold and nimble. While projects are cancelled or shelved, there is an opportunity to present others that can demonstrably increase a company's capabilities or further its objectives. While competitors cringe in fear, bold maneuvers can occur unopposed. Anything from getting more compelling pricing from vendors, to snagging top-notch talent at bargain basement pricing is possible during an economic downturn. IT has consistently bemoaned a talent shortage, and the latest economic troubles may present the perfect opportunity to fill your ranks with talent that has been let go by other organizations.

Recessions are a perfect time to evaluate all the systems and processes that were put in place during better times, and dig up all the "nice to haves" that were shelved by the implementation team. As discussed in Innovation, the CIO's Secret Weapon there are myriad opportunities to exploit existing infrastructure and processes that are both cheap to implement, and have the potential to engender high returns.

Recessions are about value

An economic downturn creates a more narrow focus on value: the demonstrable improvement of a company's condition. The savvy IT leader will look for the value in potential projects rather than just attempting to minimize cost, as groups that can create compelling value for their internal peers or customers are always in high demand. Take the strategy consulting firms for example: their advice is equally, if not more valuable when times are difficult versus market conditions where it is easier to be an economic winner. Applying the same mindset to corporate IT can make it a competitive weapon during down times, rather than another cost to be scrutinized.

Working hand in hand with your counterparts in Finance can accelerate this process even further. While the financial savvy of IT has improved dramatically over the past several years, the CFO brings financial acumen and insight to formulating strategic projects that few CIOs possess. This dynamic duo can combine the CIO's broad knowledge of business processes and technical acumen with the CFO's financial capabilities and strategic insights to design projects that would accelerate corporate objectives in high times, and downright obliterate competition in leaner times.

Despite the doomsday scenarios predicting otherwise, IT can weather this economic storm and deployed well, use it to create dramatic competitive advantage.

Patrick Gray is the founder and president of Prevoyance Group, and author of Breakthrough IT: Supercharging Organizational Value through Technology. Prevoyance Group provides strategic IT consulting services to Fortune 500 and 1000 companies. Patrick can be reached at patrick.gray@prevoyancegroup.com.

About

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

14 comments
timothy_patnode
timothy_patnode

I am at least one of those to work full time as an IT Director (That was the title I chose as they have no one else in the IT department except me) My boss seems to value my opinion and usually uses my judgment to allow me to continue projects that need to be done. I do it all in my world of IT. Exchange 2007, Cisco Infrastructure, IP Telephony, Websense, Antiviruse, and even PC level work. When I began with this company we had about 40 PC's that were (Inactive) sitting in a storage area. Yes these machines were a little old, but virtually all machines had Pentium 4 Processors, with at a minimum of 1.5 GHz processors. I have been slowly reformatting, reloading XP, and upgrading RAM. These PC's are now going back in service. When I tell my boss that I can take 10 machines, rebuild them up the memory to the Max capable, and spend under a $1,000.00 he says "Is that possible?" Well I am doing it and this is one way to help with recession proof in my IT world.

DimBulb
DimBulb

I agree that this will be a good time to examine and improve our processes: however the way it will play out is this: Cut expenses-make the desktops live for another year, no new equipment purchases except in case of hard failure, no new software. Make it work with a 10% budget cut. The reality is that IT does not run the business- it is an expense and eats at profit. It was that way in the good times and now that times are rough, IT looks like a leech feasting on the lifeblood of the real workers. Get used to it.

chip_langowski
chip_langowski

Our IT staff has been cut almost 40% while Finance, Facilities and the Executive staff have increased dramatically in size. We have deployed automation and new systems that allow the "real workers" that serve our external customers (the bill-payers) to do more work with fewer employees. Anyone that has ever successfully located the "Start" button on the Win95 box at home, or made that sae system connect to a wireless router, thinks that they know more than the IT staff. No, IT does not normally make money for the company. More importantly, they can save the company HUGE amounts of money and improve profit margins by making it more efficient.

sboverie
sboverie

Generally, recessions are part of the business cycle. Recessions can be a healthy retreat for the economy or could be a symptom of srructural change going on. Since the early 90's we have been some what spoiled by more years between recessions and we forget how to deal with the downturn. This recession is marked by a correction in value of the real estate markets. The second big hit this time is the credit industry is adjusting to the correction of the real estate industry and this keeps widening out from the initial correction. What makes this time shaky is that the value of all real estate is in question. How this effects IT depends on the relation between the business of the company to its financial and credit health. If credit is tightened then projects may be cancelled or delayed and IT staffing could be frozen or reduced. How IT fares depends on the percieved value of IT services in contributing to the bottom line. If IT is seen as a cost, then expect cost reductions. If IT is seen as revenue enhancing, then expect pressure to increase revenue. In either case, update your resume and stay alert for the time to jump to a better job.

Project Manager
Project Manager

In these troubled times, do we see more IT sourcing to cheaper desitinations?

shryko
shryko

This is not a case for outsourcing, nor a case for in-sourcing. This is a case to review all the spending, and more specifically, the ROI... if outsourcing will hurt the quality, it's the case of saving the bottom line at the cost of the top line. Increasing margins but decreasing the sales doesn't win, generally. I'm a finance person, but still a geek, so, I understand that CFO and CIO *TEAMWORK* will be what comes out with the best results. Strategies that are from one OR the other, well, generally are a bad plan, as the different knowledge/skills allow them to make up for each others' shortcomings.

pbyrne
pbyrne

Take a deep look at the systems and processes and ask "how can I do more with less people"? Our firm has been executing that strategy for other companies, via a service called Consulting-On-Demand. Take a software area which requires five people, automate the tasks and use specialists on a part-time basis. It adds value to the company and enhances the role of a senior finance or IT executive. Patrick

TheProfessorDan
TheProfessorDan

I strive to remain professional in my posts but I am going temporarily abandon that goal. If I ever ran into one of the "pundits" that this article refers to celebrating being right about the economic free fall that they have predicted, I would like to punch them. If I had made this prediction and it came out right, I would feel horrible. It did happen and now it sucks. As the effects of economic slow down on the IT world, this is not new. I have hard the comment "IT doesn't make money, it spends money," more times that I care to think about. Executives see IT as a void, a black hole sucking up capital and returning little. This is the common struggle IT management has with CEOs and CFOs, trying to justify our existence when in reality; the only way to justify it is to see it fall apart. It is a losing cause. Until IT management can move into "regular management" roles, IT management needs to accept it and move on.

Deepak_Goel
Deepak_Goel

In this crunch time enterprise wide Projects and Portfolio Management applications can give lots of real time visibility, reduce investements on waste IT inventories, bring visibility on poor perfroming and profitable projects. PPM Studio is one of the industry leader in this segment, please visit www.ppmstudio.com for more information

TonytheTiger
TonytheTiger

The title seems like you're looking for protection. You shouldn't need any. You should be doing the same thing, whether in a recession or not... Providing value to your customer. If you do that well, you'll thrive regardless. If you don't, you won't. The dollar might be legal tender, but it is our labor that is the backbone of this (or any) economy. If we concentrate on that, the rest will right itself. Not because of government action, [b]in spite of it![/b]

LarryD4
LarryD4

1990-2000 With the .com boom fueling the IT indusrty and the rush to make sure that the year 2000 issues didn't shut down the world, it was an IT analyt's dream. It seemed that the consulting industry during this time was the only smart place to be. With the basic credientials and certifications you could work on a project for 6 months a year and go on to the next. You would aquire more knowledge, more documented experience, and obviously demand more compensation for services. 2000 - 2005 The IT industry has kept on the path of consultants for two reasons. They were a short term hire that can be directly written in and off of your budget. And their was no ramification for not keeping them. And the best part was, they really were not your employee. 2005 - 2007 The slow down of the IT consulting market has begun. Business is paying more attention to the global market and the down turns in industry. Business has outsourced services and hired consultants to do the work and now they need to ween out the dead wait, primarily to make the budget as attractive as possible. 2008 The economy is in turmoil and the IT industry is scrambling. The over bloated outsourcing staff is getting slashed, which is something they should have done three years ago. Budgets are being slashed and the CIO/CTO is looking for ways to get the job done. ----- I'm not trying to predict that consulting services is going to fade away. But when times get tough, industry tends to focus on using the resources they have, rather then outsource. Its already been obvious that companies are asking more from in houe employees rather then bringing in consultants. And if you look at this logically, why would I outsource my e-business portal or application development when I'm not sure if that company I outsourced to, will be their tomorrow. Let alone if that consultant writes good code that can be supported, changed, and/or maintained by in house staff. CIO/CTO are changing their pitch, "We need to invest in long term employee relationships keeping strong, technically capable people on staff" Any company executive that looks at IT as a blackhole has a black hole in their head. I.T. is the business foundation, like it or not, and if you short change your foundation the house falls.

santeewelding
santeewelding

Man says he can hold it all up with virtuality.

shryko
shryko

You'd feel horrible about being right, because you'd be looking at the human aspect of it. These "pundits" are generally academics, who're not looking at it from a personal perspective, but at the "eye in the sky" perspective... Being right is a matter of reputation, and being right is what gets them a better paycheck... so, while this is a case of the economy hurting, they're now in better standing over their peers who ridiculed them... thus, they celebrate a disaster...