Preparing for the Economic Downturn - Alternate Routes

Alternate Routes

Such wide-reaching efforts aren’t for everyone, though. Some CIOs choose to take a hard look at what they have and make the most of it, rather than rethinking application portfolios or staffing strategies while trying to shield their companies from the effects of a recession.

When the recession hit in 2001, Sue Powers was CIO for Worldspan, which handled travel reservations for airlines, hotels and car rental companies. The downturn convinced Powers, now CIO of Travelport GDS, which acquired Worldspan a couple of years ago, that she needed to ask more of everyone—managers, employees and vendors. That had a particularly large impact on the corporate culture of IT and the terms under which she acquired products and services.

Powers called on her front-line managers to do a better job documenting performance. This helps her identify the strongest and weakest performers as the current slowdown evolves so Worldspan can retain the most valuable people should cuts become necessary.

Powers also asked Worldspan vendors to change the way the travel services company pays for products and services. For example, she didn’t want to have excess capacity in the form of software licenses that wouldn’t allow her to scale back the number of users when necessary. Powers wanted to pay only for software licenses the company used, while having the ability to ramp up when things improved.

Powers also began turning to on-demand applications where appropriate. She also started replacing some site licenses with per-seat or per-user deals.

She found vendors willing to make such changes because of the potential to do more business with the company when the economy regained strength. She rewarded cooperative vendors by doing more business with them the past few years, and has been able to roll back her capacity costs because of the flexible pricing she negotiated.

For Pulte Homes CIO Batt, a little bit of every approach is in order. He’s been looking to cut costs on everything from software maintenance and network capacity to mobile phone plans and contractor agreements.

Batt is well aware that his having been in the industry—telecom—most affected by the previous downturn probably gave him an advantage as the subprime mortgage crisis took shape. If nothing else, it helped him recognize the early signs that something was amiss. “Any reasonable observer should have seen both [downturns] coming,” he says. “But I know I was much better at predicting the second one after experiencing the first.”

While Batt and other CIOs agree that the best time to plan for a downturn is during an upturn, they say it’s never the wrong time to make sound business decisions. Too often, economic lows cause otherwise rational business leaders to make knee-jerk reactions.

By adhering to tried-and-true business principles now, CIOs will make quicker, less painful decisions when the economy contracts, and will help their companies better capitalize on the inevitable uptick.