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How IT Directors Can Respond To The Economic Crisis

Over the past few months the economy has changed more than in the past decade. The economic downturn means that many strategic plans written earlier in the year can be shelved. We are facing a new world economy, where there are no clear rules and no proven models for success. As Dr Saj Nicole commented from Forbes, "Despite all the different issues that top leaders are facing, there is a commonality to great leaders in times like these." It can be summed up in the phrase 'Never waste a crisis.' So as an IT director how can you ensure not to waste the opportunity this crisis gives you?

First go back and review budget plans you did during the fall and be prepared for the three possible scenarios the business will throw your way. The first scenario is if your business is thriving during the economic crunch (Low cost provider) and you need to increase investments in IT infrastructure and development. This is not difficult to plan for as you will be able to get some great deals on IT services in 2009. The second is that your budget remains flat. Again I think as an IT director you will be seeing prices of IT services fall in 2009 as increased supplier competition drives them sticky downwards. So in essence you will now get more with the same. The final scenario which will be most prevalent for CIO's is a reduction in budget of anywhere between 5% and 30% depending on the individual industry and how badly it is being impacted by the credit crunch. Create a presentation with the three likely scenarios and clearly communicate the impact of stopping or reducing services. In other words, manage the expectations of the business peers so they know the specific consequences. During these regular updates with the business I think it's the duty of a CIO to show how IT can help the company in its areas of operations to create benefits often far greater than the cost reduction.

IT leadership teams around the globe should see this economic crisis as an opportunity to review various new delivery models which otherwise would have been difficult to get approved. In this brief article we will review three IT delivery models where as an IT director you might be able to enhance IT Services and reduce costs simultaneously.

In the past quarter many articles have been written about Cloud Computing as a new delivery model to help IT directors pay for on-demand utility and deliver with leaner budgets in 2009. According to a 2008 paper published by IEEE Internet Computing "Cloud Computing is a paradigm in which information is permanently stored in servers on the Internet and cached temporarily on clients that include desktops, entertainment centres, tablet computers, notebooks, wall computers, handhelds, sensors, & monitors. Cloud computing is a general concept that incorporates software as a service (SaaS), Web 2.0 and other recent, well-known technology trends, in which the common theme is reliance on the Internet for satisfying the computing needs of the users". Google is investing heavily into this area by providing business applications at more competitive rates than Microsoft. As a CIO try and set up a pilot with a dynamic business group, complete a review with current business applications and investigate if there is a strong business case for switching delivery model to avoid expensive software licensing agreements with the existing agreements you have in place.

In the past 3 months, I have spoken to clients that were investigating outsourcing email services to Yahoo or Google. The move to providers for email would eliminate the need for disaster recovery for email, since that is included into the service. If the trade-off is 95% of the service for 20% of the cost, how can you explain to a CFO to keep service in-house during a time where every other department is being asked to costs. We know Google is in full swing at building mega data centres around the world, and it will be interesting to see what email service offering they will provide businesses. Don't be surprised if they will again knock the competition sideways.

A third possible scenario for a CIO is to Multi-source IT services. Quite simply, the decision to multisource is no different from any other business decision - if sufficient value can be returned in a short enough time span, its worthwhile. More importantly, the decision to multisource doesn't need to be organisation or function wide. It can be implemented in one IT tower to reduce cost or improve the level of talent. Additionally, if you work with versatile suppliers that provides several process or technology services - you can actually implement a very dynamic multisourced environment without increasing your overall number of suppliers. In both cases, you can take a pragmatic approach towards developing your target environment, and the governance and management processes necessary to make it successful. You are in total control of how much multisourcing costs (and saves) your business. We have seen clients reduce costs by 25% after introducing genuine competition at the supplier level.

IT should be looking for ways to help the business thrive. What will happen to IT budgets in the next 3 years depends on the vertical your business is operating in, but you should take this opportunity to plan and prepare for the likely scenario of a budget cut. Furthermore, investigate and explore new delivery models which not only will see the cost go down, but might very well see increased levels of service. I think IT leaders around the globe will need to be more flexible and faster to respond to the changing business strategies, the successful IT directors will be the ones who can keep it simple and execute consistently during unstable times. 

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