Plan for the good times while the downturn bites

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Plan for the good times while the downturn bites

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.

More on managing budgets and finance:
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This was first published in February 2003

 

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