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To cut or to spend: ITs dilemma in a recession

Ross O. Storey | Oct. 14, 2008
As they say, the clearest measure of management ability is when the chips are down.

How IT budget decision makers react to the current global financial downturn could very well reveal their overall attitude to the role of information technology in their enterprise. As they say, the clearest measure of management ability is when the chips are down.

The predictable response to todays reversal of the worlds financial fortunes would be to cut expenditure, stop projects, delay upgrades and reduce staff numbers. But this could be a serious long term mistake.

If an enterprise regards IT as a black hole for expenditure, a revenue-burner, rather than a revenue earner, or an annoying and wasteful cost centre, then it will indeed be a target for the razor gang. However, if an enterprise takes a more practical, longer term view, then an argument could be mounted that now is precisely the time when IT budges should be increased, to maximize efficiency, productivity and profits. When the going gets tough, the tough get going is a threadbare cliché that pops to mind.

The fact is that IT has faced tightening budgets for several years, and, in many cases has already had its fat cut away. Any further cuts could strike bone and exacerbate, rather than enhance an enterprises ability to ride out the current financial storm.

Harsh economic times should make it imperative that enterprises capitalize on the competitive advantage that IT can generate. Technology approaches such as Business Intelligence, outsourcing, Software-as-a-service (SaaS), virtualization and even Green IT, all have strong demonstrated potential to cut costs and save money relatively quickly.

Business Intelligence, by helping measure performance and analyzing systems at the granular level, can flush out areas of endemic waste, outsourcing can put some process in better hands, SaaS can save money because buying, installing, customizing and maintaining applications is expensive, virtualization and Green IT can cut power bills within weeks. They all can deliver a pretty prompt return on investment and have been proven to save money in the longer term.

By perhaps spending a little extra to implement such systems, could make some enterprises more competitive, more efficient and more likely to come through the economic downturn. Chief executive officers are, no doubt, now thinking long and hard about this quandary; whether to cut to satisfy the shareholders in the short term, or strategically upgrade to make their business more efficient and resilient. How they resolve this could determine whether they are still in business when the economy inevitably bounces back.

Ross O. Storey, currently the Managing Editor of Fairfax Business Media Asia, is responsible for the editorial content and production of MIS Asia, CIO Asia, Computerworld Singapore and Computerworld Malaysia magazines.

 

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