IT’s Role in the Slowdown
Recently talking at the World Economic Forum, the British Prime Minister Gordon Brown mentioned that the word credit comes from the Latin word Credo, which means Trust. And lack of trust is exactly what is plaguing consumers and businesses the world around and feeding itself into this vicious circle of a downturn. Given the situation we are in it will surely be a while before the world and business leaders are able to get confidence back into the markets and businesses.
In the meantime, businesses are resorting to all kinds of measures to weather this slowdown – from thinking of new creative ways of doing business to the most obvious measure i.e. cost cutting.
Information Technology having become such an important part of the strategy and operations of any business, is expected to play its role in the same. In this regard, these are a few thoughts on what the enterprises are already doing, will be doing or should be looking to do during this time.
- Squeezing more out of the currently deployed solutions
Enterprises will look harder at how they can squeeze out more value out of their current investments – be it better utilization of hardware, deploying paid for but unused software, encouraging the business to use more standardized solutions rather than undertaking expensive developments etc. As resources become scarcer, enterprises will also look at underutilized solutions with a target to rationalize some, since this in turn will free up valuable hardware and resources.
- Technology projects that enable cost savings, but can be quickly implemented
For e.g. a Supply Chain Management solution that enables efficiency in the Logistics process and drives savings, Shared service centers to consolidate administrative processes or rationalization of the product portfolio, where technology is the enabler to identify the low performing products.
- Or solutions that enable to generate cash
For e.g. a Business Intelligence solution, which provides useful insight on cash collection efficiency of the enterprise, or Price optimization solution which shows the discrepancies in prices across various segments and highlights locked potential, to be gained through price alignment.
- Solutions that foster better Customer service and relationships,
There is nothing more valuable then having a strong customer base during a downturn. But this does not only mean more technology, but more efficient technology, that sales & service personnel can spend more time on the field interacting with the customers. For e.g. an efficient Sales Management tool, which gives the sales personnel a 360 degree view of the customer, helps them to be better prepared for customer interaction, identify up-selling and cross-selling opportunities, and provides intelligent insight on how to best manage spending for achieving maximum sales.
- Working with proven solutions and reliable partners
This is important because when dollars are few and far, enterprises would not like to take chances on new technologies, or vendors which might not be around in a couple of years to honor their commitments. This is especially true in a downturn like this, where the survivability of many is being tested to the limits.
- More Fixed priced projects, which are tied to delivery
Even before the downturn, the trend in the industry has been more towards fixed priced projects. This trend is bound to become stronger as CIO’s are looking for more predictability of costs and want to tie costs closer to results. This also helps in justification of projects internally, where the value of every dollar spent is being scrutinized.
- Shorter projects or project cycles and incremental gains
What has been a reality already since the dotcom bust is, that the number of mega projects has vastly reduced. This will go down even further, as enterprises will undertake smaller and more focused projects. And the larger projects will be divided into multiple phases, where incremental gains can be delivered at the end of every phase, rather than having the risk of not having the desired results at the end of a big long project.
- Service oriented architecture
Adoption of Service oriented architecture will only increase, as it allows enterprises to make the most of their current investments by linking heterogeneous systems and fast development & deployment of new business processes. On one hand enterprises can quickly adapt and introduce new business models in this challenging environment and on the other hand IT can help in reducing costs by simplifying the software landscape.
- Technologies like Virtualization that enable better usage of resources
Virtualization will gain further traction as it enables more efficient usage of hardware. Virtualization for e.g. enables enterprises to reduce the number and types of servers, which leads to immediate cost savings. Moreover, ancillary costs like facilities and power consumption can also be reduced due to reduction in number of servers.
- Cloud computing
IT simply means renting server space instead of having servers in-house and then paying for what you use. Thus enterprises do not need to have their own servers, or facilities to house those, personnel to manage them, electricity to power them and so on. One still has to pay for the usage, but its more efficient since you only pay for what is used, it’s cheaper since costs are spread over multiple customers and it’s certainly more efficient. What more, its more environmental friendly since the server capacity is consolidated in the Cloud Computing farms, rather than individually at various enterprises.
- Green technology
This doesn’t have to be done only because it’s fashionable, but also because it brings a lot of value. Some of the initiatives mentioned above like Cloud Computing, Virtualization etc. can all be classified under Green Technology, since they enable more efficient use of resources, help in reducing our carbon footprint and make a lot of sense because of the positive impact on costs. But that’s not all; there is huge potential for savings (money and CO2 emissions) by using smart technology to better manage transportation systems, production plants, or internal facilities like lighting, heating, ventilation and so on.
- Software as a Service(SaaS) based on the subscription model
The adoption of the SaaS model has been increasing at great pace in and will continue to do so, since it saves companies upfront investment in hardware, software and facilities. With the ‘Pay by the Drink’ model companies have the flexibility to scale their investment with the growth of the business and hence also better manage their costs in the slowdown.
- New financing and payment models
Firms are also offering this as an option to or in addition to the traditional or the SaaS model. Vendors are stepping into support customers with more flexible payment models, which are then spread over a few years rather than upfront payment, or even helping to arrange finance for critical projects where the funding might not be possible in-house.
This has been long around, but even the ones that have been hesitant before will now be inclined to take the step towards outsourcing. Enterprises will either outsource more of the non-core operations or consider consolidating the administration tasks under shared service centers.
Unlike in the last few years, where IT has played the role of driving higher productivity and efficiency to drive business growth, now its being called upon to play a different role i.e. in helping enterprises manage costs and provide insight in unlocking the hidden potential with the enterprise.
I think there’s no doubt that like many other things, we will see the landscape of IT much changed at the end of this slowdown.