Five Tactics For Riding Out A Recession
by Alex Cullen
Last week, Forrester's resident economist, Andy Bartels, and I engaged in a healthy discussion about the current economic climate and how IT can ride out the current recession. Forrester's forecast for tech spending is in line with the consensus view of the economic forecast - a relatively shallow recession that will last until Q3 next year – but we see as much as a 35% probability of a longer, deeper recession which could extend into 2010. But these are averages across all industries – your industry segment and firm may experience a "short, shallow recession", and "long, deep recession" or even no recession at all. All these scenarios will mean different impacts on IT – but paradoxically, the "long, deep recession" will be the one that should bring IT's value to the forefront. Why? Because if your industry and business are planning for this scenario, almost no strategy the firm might take to lower cost in a sustainable way can be done without technology – and your businesses will need you to guide these technology investments towards the maximum business return.
In either recession scenario, the imperative is the same: CIOs must work hand-in-hand with the business to communicate IT's business value in the economic downturn. Forrester has touted the notion that Business Technology (BT) - pervasive technology use that drives business results and that is increasingly under the control of business organizations and not IT – will eventually supplant IT.
So, during this time, how can CIOs demonstrate its value as a business partner?
Upgrading business involvement in IT governance. Improving IT governance is on the agenda for many organizations as they attempt to improve the business value that they are getting from their IT investments but, more often than not, business executives are missing from these efforts. IT leaders must put IT on the agenda of board of directors' meetings, establish an IT steering committee to deal with IT matters, and require business sponsorship of key programs.
Pruning the IT investment portfolio and improving ability to execute cost-savings projects. CIOs and CFOs will be looking for spending they can quickly ratchet down — with the easiest target being IT projects. Making informed and defensible decisions about which projects to follow through and which ones to cancel or defer can be difficult – but CIOs must champion a rational framework for looking at both in-queue and active projects.
Combining cost and cost driver transparency with cost cutting, using a services model. When your business peers don't understand how the cost of IT relates to their business function and actions, they only fixate on the total cost – probably as a percentage of revenue – and complain it's too high. "Services," logically packaged and clearly communicated, are easier for these peers to understand. Roll-up all your costs – projects as well as ongoing expenses – into business visible and valued services, and shift the discussion to what they want from these services.
Adjusting your organization model and consolidating shared services, distributing some functions into business. It is a good time to look at the structure of IT — looking for opportunities to boost performance and IT effectiveness. CIOs should examine which IT activities should be shared services and which should be distributed.
Cultivating your talent pool; taking advantage of skills coming on the market. A side benefit from a tightening job market is improved recruiting prospects — an opportunity for IT organizations to build up bench strength with hard-to-find competencies. To ensure that scarce and difficult-to-find talent is retained, you need to be able to accurately value their investments in developing and retaining this most valuable asset — your human capital.
The economic news can only be described as disheartening and it's easy to overreact. But, smart CIOs know that reacting by hiding is precisely what their firms don't need and what they should not do. By following these five steps, CIOs should be positioning their organizations for the inevitable upswing.
Featured Blogger Alex Cullen
Alex Cullen is a Vice President and Research Director at Forrester Research, where he leads the team responsible for research and advisory services that address the needs, priorities, and concerns of CIOs.
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