As the debate continues about just how bad and long-lasting the economic downturn will be, there can be little doubt that the majority of IT departments will be squeezed to one degree or another over the coming year or two if they haven’t been already. Indeed, recent Freeform Dynamics research suggests that while IT professionals are generally not panicking at the moment, four out of five acknowledge the likelihood of IT investments being hit.
The good news, if it can be described that way, is that unlike the last crash that happened at the height of the dot-com spending frenzy back in 2001, which brought everything to a sudden and painful halt, we seem to have more time to think and plan this time around. Furthermore, the general view is that IT departments are, on the whole, better prepared to handle ‘adjustments’ in a controlled and objective manner, having adopted a more measured and business-oriented approach to spending as things began to recover in the 2005/1006 timeframe.
Against this background, there is an opportunity for IT professionals to be a lot more proactive about how they deal with the challenges created by the uncertain economic climate. This is something we at Freeform Dynamics have been spending a lot of time on recently, and the conclusion we have come to is that it is important for IT departments to look beyond the obvious knee-jerk operational cost cutting reaction, and adopt a more holistic approach:
As this chart illustrates, while exploring ways of reducing internal IT costs is important, a lot can also be achieved by helping those in the business optimise the way they use IT, and potentially by introducing new IT capability that enables the business itself to become more efficient. It’s then really important not to forget the top line of the business. The performance of sales and marketing departments in a downturn when fewer opportunities exist in the market is a particular priority for most businesses, and IT can help significantly here.
Counterintuitive though it might seem, many of the actions that are likely to make sense may involve a some investment. Whether it’s virtualisation solutions to build sustainable efficiency into the infrastructure, desktop refresh initiatives to reduce the ongoing cost and burden of maintenance and support, or advanced communications, such as mobile technology and unified messaging, to drive workforce level efficiency, a few well qualified tactical investments now will pay dividends down the line.
This, of course, brings up the question of capital expenditure, which is going to become an increasingly more challenging discussion as time goes on. Fortunately, however, while we are firmly in the grip of the credit crunch from a banking industry perspective, the financing arms of the big IT vendors are generally in much better shape, and a couple of them we have spoken with recently, HP and Microsoft, confirm they are in a good position to help creditworthy customers in a variety of ways, as we are sure others are too. Before dismissing or deferring IT investments, it is therefore worth approaching players like this, either directly or via their partners, to explore the financing options that might be available to you. And it’s not just traditional leasing we are talking about here, but full blown project financing potentially covering all of the hardware, systems software, applications and services necessary to deliver a solution. It it’s a while since you have looked at this area, it is definitely worth you binging yourself up to date.
It addition to financing, it is probably also worth exploring alternative delivery models. Introducing hosted services into the mix through the so-called ‘Software as a Service’ (SaaS) model, for example, can overcome the need for up-front investment in hardware and software and thereby allow some projects to proceed that would otherwise be deferred due to lack of capital budget. However, we need to be careful not to position SaaS as a universal magic bullet, and the same can be said about other services that are currently being promoted by the IT industry under the ‘Cloud Computing’ umbrella. Quite apart from the reality that many of these services are still relatively immature, IT managers, architects and operations specialists are quite rightly wary of considering hosted subscription based services beyond relatively simple, non-critical applications requiring minimal integration. SaaS and similar options may therefore be able to help, but they should be thought of as just part of the mix, with specific offerings being considered and qualified individually and objectively based on context and requirement.
So, with all this in mind, taking a more proactive and holistic approach to dealing with the downturn increases your chances of being able to deliver sustainable results. As a spin off benefit, the holistic approach can also lead to political and control related benefits, as focus is diverted from the pure IT operational cost question. This is a far better position to be in as it allows IT professionals to prioritise activities that will really make a difference at a business level, rather than being dragged into the depressing world of damage limitation when forced to reduce costs associated with the maintenance and operation of essential infrastructure.
The imperative here is clearly to act sooner rather than later. If you, like most of those who have been giving us feedback in our research recently, believe there is still time to plan and prepare – then make sure you use it.
In the meantime, if you would like read more about the issues and ideas discussed in this article, you are welcome to a copy of our report entitled ‘IT Delivery in the Downturn’, which can be downloaded free of charge from here.