When times are tight, it seems logical that everyone should aim to
save money, rather than spend it. But CIOs must also make sure they
invest in strategic initiatives to guarantee a sound future for the
business.
Most CIOs are torn between maintaining the past and shaping the
future. When there is a downturn in the economy they must focus on
factors that will deliver short-term benefits with a limited budget
and low risk while setting the conditions for success when
confidence and the economy improve.
But where should you start? An enterprise's ability to connect to
customers, suppliers and other stakeholders is critical to its
success in the connected economy. So it is important to create an
outline design and design principles for extended enterprise
architecture to ensure that short-term cost reductions are not made
at the expense of achieving longer-term goals.
Check your response times
It is essential to
focus on making the business agile and resilient. This is not only
significant during periods of economic stress, but also when
recovery starts. While enterprises must respond quickly and
innovatively to threats and adverse situations during an economic
downturn, they need similar response capabilities during an upturn
to exploit new opportunities and face up to new competitors.
Enterprises that can respond effectively in both circumstances will
perform better than those which fare well during a downturn but are
slow to react when prospects improve - even when poor sector-wide
economic conditions persist. IT and business leaders should start
by creating and communicating a clear picture of the necessary
personal and enterprise behaviour necessary to allow the business
to react quickly to events as they happen.
Another criterion the CIO needs to take into account during tough
times is the amount available to spend. It is worth noting that
even in a downturn, enterprise renewal through strategic
enhancements and new developments is imperative. For this reason
you should try to set aside at least 10% of resources for new
strategic work.
Know where the emergency exits are located
It
is also good practice to reduce long-term commitments. This is
particularly important because a downturn increases the risk of
supplier failure. As a result, enterprises should review supplier
status regularly and ensure that "escape routes" are planned and
rehearsed in relation to risk and impact. At the very least
effective escrow arrangements should be established for all
critical software and other critical data and processes.
Similarly, enterprises should assess the risk of downstream
partners in the supply chain, including network service providers,
and these should be integrated with regular business continuity
planning activity. This is best practice at all times, but is vital
during an economic downturn.
Ongoing appraisal of suppliers' situations should mean you can
approach third party business relationships without undue fear and
during a downturn it is worth re-examining outsourcing as a way to
cut costs and reduce capital spending. Gartner has identified
strategic sourcing as an approach that ensures enterprise-wide
concentration on core values by establishing sourcing partnerships
that offer long-term value as well as short-term cost
advantage.
Don't forget the personal touch
Finally,
remember that good leaders motivate people to work in a
cost-constrained environment while staying focused on leading
sustainable enterprise value. They do so by delivering clear
purpose and vision combined with an honest assessment of the
outlook. They also provide personal visibility to all their
stakeholders.
John Mahoney is VP research director in
business process at Gartner.
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