Finding IT`s Upside in the DownturnBy Brian P. Watson | Posted 12-10-2008
Finding IT`s Upside in the Downturn
Dan Gingras expected panic.
Gingras, a former CIO at Bausch & Lomb and Watts Regulator Co. and now a partner at the consultancy Tatum LLC, frequently consults with CEOs and corporate boards on IT strategy. After the Wall Street fallout and the looming uncertainty following it, Gingras expected his clients to sound the alarm, particularly on IT spending.
What he found surprised him: Instead of panicking, business leaders--while acknowledging the economic duress--saw the downturn as an opportunity to reassess their strategies. Priorities had to be reexamined, but the knives never came out to slice up their IT plans. "I've never [before] seen a time in my six years of consulting where people wanted to step back and assess things," he says. But that's what's happening now.
It turns out that despite the expectation of many experts that businesses would annihilate their IT spending and projects, many IT leaders are taking reasoned approaches to setting and executing on their technology priorities. That's reflected in our 2008 Future of IT study, which found that IT leaders are more intent on improving business processes and aligning IT with business objectives than cutting costs.
Gingras attributes that shift to the maturity of technology, along with business' growing understanding of its potential impact. "I think there's a realization that this is important, that it's not just backroom stuff anymore," he says. "With that realization, the knee-jerk reaction has gone away, and we're seeing a thoughtful re-evaluation."
With that perspective come opportunities for improvement. Just look at Nathan Brimmer, CIO at Franklin Mint. Like the majority of retailers, Franklin Mint expected to take a hit. Cutting costs became necessary, and Brimmer and his team had to make some quick decisions.
Six months ago, they began looking for new ways to manage digital assets. They evaluated some six-figure products, but had to dial back their spending expectations. Then a few of Brimmer's engineers stepped up and dove into creating an open-source program.
"If anything, the economic situation is forcing my guys to be more creative," Brimmer says. "It allows me to see all the resources and talents we have."
Cutting costs also helped them expand deeper into new and emerging technologies. Franklin Mint is currently in the process of changing ERP systems. Instead of spending $500,000 to $1 million in upfront costs on a big-name vendor's product, Brimmer opted for a software-as-a-service offering, which cost about $15,000 initially.
Not Business As Usual
Not Business as Usual
Michael Gorecki, vice president of solutions architecture at AXA Equitable, a life insurance and annuity firm, says that despite playing in the financial sector, his France-based company is less skittish than most American financial firms. But that doesn't mean it's business as usual for him and his team.
So he's looking at how to get more money out of previous investments, focusing on return on assets (ROA) as opposed to return on investment (ROI). That mirrors a finding from our Future of IT survey: A little more than one in three IT executives cited improving ROI as a top management priority for the coming year. Service-oriented architecture figures heavily here, as Gorecki looks to weave together existing elements, rather than spending money for new ones. He's also looking to push into new endeavors, such as cloud computing.
While many experts hold the view that companies should spend on IT in tough times to drive competitive differentiation, Gorecki says that era has past. "To say that they should be spending more was at the end of the last century," he says. "Now, I want to put very exact slivers of money into specific areas to foster growth."
By making smart technology decisions, Gorecki adds, CIOs get an opportunity to match wits with their business colleagues in the C-suite. As businesses reassess their priorities, IT leaders have a chance to continue educating their business partners on how technology can positively affect their overall operations. "That is an education IT needs to deliver to C-level execs, because IT is changing more and faster than ever before," he says.
Tatum's Gingras has already seen a drastic change in the way non-IT executives view their company's technology strategy. That's due to two factors. First, he says, the "dream" of IT creating competitive advantage is finally being realized. It's not perfect, Gingras notes, but it's come a long way.
Businesses that have invested heavily in e-commerce and operational efficiencies can't just push them aside now in the face of economic uncertainty. Instead, the current climate pushes them to look at IT strategy as an opportunity for more cost savings--whether it's through virtualization, lowering energy consumption, increased telecommuting or another initiative.
Second, snap decisions can lead to mistakes. Technology has become so ingrained in corporate operations, Gingras says, that many executives fear doing something stupid. "Really, what can you turn off?" he asks. "There's a utility component of computing that companies can't do without."
Another bright spot from our Future of IT study is that the number of CIOs predicting a "radical restructuring" of IT departments in the next five years dropped to 47 percent from 54 percent in our 2007 report. That number is still relatively high, but it points out a growing sense of IT's stability within the larger enterprise.
That takes us back to Gingras' surprise discovery. The economic crisis may be providing an opportunity for introspection, but it's not creating a dangerous environment for IT. That's evidenced, too, by another finding in our survey: Only one in 10 respondents said it's likely that their IT department will be disbanded, leaving IT decisions to business managers.
So just when it looked grim for CIOs, a few mouth-watering opportunities have emerged: to exploit the crisis--and the subsequent strategic re-evaluations--to make smart technology decisions, flex their business acumen and educate business executives on technology's role in driving success. IT leaders should be doing all of the above in both good times and bad, but the current climate offers them a chance to do so when it truly matters. And that's something CIOs can't afford to pass up. --with analysis of research findings by Guy Currier