Are you ready for the recovery?

On the cusp of the new year Marc Jessiman, territory manager at Dimension Data appeals to enterprises to start liberalising IT spend if they are going to take advantage of any economic warming in 2010

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By  Marc Jessiman Published  December 16, 2009 Network Middle East Logo

One of the least discussed problems of the economic downturn is organisations not thinking about how they're going to answer shareholder questions when their current cutbacks on technology spend prevent them from exploiting the upturn when it comes. Research house, Gartner, says that a delay in technology investment now could lead to an 18-month catch-up period when the economy recovers. Put that fact into context - if enough organisations allow their technology to lag behind because of the economy, they could be responsible for extending the recession, not just for themselves, but for the rest of us.

There is another way

The great irony is that technology can actually help companies prosper through this recession. One of our banking clients in the United States, for example, feeling the squeeze in its home market, went out and acquired a financial institution in one of South America's emerging markets and backhauled the new bank's systems into the sophisticated ones of the US-based bank - thereby gave itself the means to immediately push all sorts of fresh products into an entirely new market. A market that was absolutely ripe for them.

Additionally, by using technology to give the acquired bank's employees immediate access to collaboration tools, experienced specialists, buddy groups and new applications, the mother-ship was able to upskill employees in half the time and at a fraction of the cost of more conventional means, as well as reduce the cost of operations across both institutions.

Spending decline

By contrast, Gartner's IT Spending Forecast update, released earlier this year, was rather frightening in terms of its implications for the business world. The analyst predicted a decline would be recorded over the rest of 2009 of as much as six per cent in US dollar-based IT spending in the four areas of hardware, software, IT services and telecommunications.

Of those four areas, hardware has been the hardest hit because of currency and credit issues, leading to a stalling of hardware-related projects. But when the figures are collected there is likely to be less spending on operating systems, office suites, middleware, storage, and digital content generation. And, Gartner stated, the sectors that will invest least in technology are financial services and manufacturing.

Scary though they may be, as an indicator of just how severely lack of IT spending could slow recovery from the recession, Gartner's predictions are not surprising. They also mirror trends we have identified among chief information officers (CIOs) that in turn also reflect the maturity, or otherwise, of their employers in accepting that IT is a strategic business tool, rather than simply a complicated and demanding asset.

A CIO scale

We've discovered that there are, in essence, three types of CIOs.CIO Type A is very conservative and works in organisations that do not understand the business value of IT; he is expected to cut costs during a recession and, if there is to be any investment at all, is permitted to invest in IT that will deliver more savings. CIO Type B occupies a middle ground of sorts, where the boardroom has some understanding of the business value IT can add. So, while he's is focused on both cutting costs and investing for further savings, he is also cleaning house and preparing his company's systems for the new projects that will meet their demands when the economy turns.

In our experience, there is great wisdom in using a slowdown to remove redundancies, tighten and enhance processes and gear up for the evolution of the technologies you already have in place. Meanwhile, analysts tell us that recessionary cycles are getting longer. Instead of downturns occurring once every three years, they're now happening every seven years.

In addition, they're not as deep as they used to be and recovery is faster.

Loose threads

This longer cycle has affected the ways in which business has dealt with technology. The last big downturn came with the dot com bomb in 2002. Since then there's been reasonably steady growth of the global economy. If you map the evolution of IT to that economic picture, you find a lot of companies hampered by a lot of loose IT threads.

Towards the end of the 1990s, companies were just beginning to bed down their move from mainframes to client servers. There was very little inter-networking of systems or organisations. Then everyone became distracted by Y2K and areas of IT other than those related to Y2K were starved of investment. In the following two years - to the end of 2002 - the internet dominated all investment decisions because, suddenly, everything had to be e-enabled.

Investment was hurried, random and unstructured.

In the past eight years IT has matured, with organisations such as the bank I mentioned earlier realising that IT has strategic and not just tactical value. And that has led to a lot of new, more sensibly targeted projects being started, while others have been put on the back-burner or have simply had the plug pulled.

In the process, organisations have found themselves with significant redundancies. Equipment has aged beyond existing vendor capacity or the ability to support it cost-effectively has diminished. Older systems either predate Sarbanes Oxley or have configuration best practice violations - putting organisations at risk of non-compliance. And, very few systems were built with new demands such as rich content, voice, or video conferencing in mind.

So, this recession is actually a welcome breathing space. The best time to clean house and restructure is when your systems are under minimal pressure. But, cleaning house and restructuring are still not quite enough to position an organisation for growth, whatever the economic environment is doing.

Investing to support strategy

CIO Type C understands this, because this group sits at the boardroom table. And they sit at the boardroom table because the corporation has understood that business is about processes and systems - and that the person who knows most about how to optimise those processes and systems, is the one who enables them through technology.

CIO Type C therefore, has already gone through the cost cutting exercises - long before the recession hit. He invested for savings, long before the recession hit. And he cleaned house. Now, continuously, he's investing to support the business's strategy.  This CIO isn't really a CIO any more. They are the COO of IT, in charge of executing the strategic growth plan.

Their business will be ready for the upturn. Their business will be one of the first to profit from the upturn and their business will have happy shareholders.

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