Survival Lessons from the 1991 recession

Yesterday I participated in a Computer Weekly discussion at the Dorchester on “Optimising the Delivery of IT Services”. I was asked to open the discussion, having survived more recessions than the others round the table. In fact there was at least one other veteran of the decimalisation boom and bust of 1971 and most had seen 1991.  

This recession will be more akin to that after the Wall Street Crash. However, for 70 – 80% of IT operations the short term impact will not be much worse than that after 1991 (i.e. 5 – 10% p.a. budget cuts over the next 2 – 3 years). The big difference is that a decade of outsourcing has removed in-house expertise and flexibility while increasing vulnerability to external shock along their supply chains. These are now as interlinked and incomprehensible as the systems that brought the “masters of the universe” to their knees: massive shared risks and vulnerabililities, hidden beneath layers of gobble-de-gook. Hence the commentsi n my previous blog regarding the watershed we have just crossed

But 1991 is still burned on my memory. We had just got the first Women into IT Campaign under way with £500,000 of DTI funding in return for £2.5 million of contributions from industry when  requests from our supporters for CVs from experienced potential returners dried up. Those who had wanted that exercise wished, instead, to focus on schools programmes and in-house conversion from admin to IT.  

I rang round and discovered that they had quietly chopped all external recruitment – save for niche specialists with the skills of the future. So I analysed the trends over previous recessions, using back numbers of Computer Weekly and the reports of what was then called Computer Economics Ltd. (now CELRE). I then used what I found as collatoral for meetings with personel directors, recruitment agencies, business planners and IT managers to find out what they had done or planned. I have done similar exercises regularly since but now rely on others to crunch the data and no longer publish the results myself.

Yesterday, as the IT Directors and Chief Information Officers at the Computer Weekly event  described the challenges they face today and what they want from their suppliers to help them survive, I pondered on past recessions, what their peers had said then – and what happened afterwards.

The Women into IT Foundation nearly survived. We got through the 1991 recession but the reserves were gone.  We were destroyed by the Department for Education and Skills which routed teachers, careers advisors and course organisers around the country to our enquiy service , while cutting the careers service budgets so they could not contribute to the cost. In the final year, before the funds ran out, the campaign office handled over 10,000 requess for careers material and advice, guidance and employer support to help courses and events..

My first “lesson”  therefore, is to remember that government is more likely to add to your grief than help. Even if they plan to help, the time lag from decision to implementation will turn their apparent good will into dust and ashes.

My second “lesson” is that it is much easier to know what should be done than to achieve it.

The third is that unless you plan how you are going to survive the recovery, not just the recession,you will not – and even if you do that planning, as we did, it may not be enough.

Some of those who used the ideas in my first report back in 1991 were more successful.  I used their experience in subsequent reports and I remain on good terms with many of them and their successors. That is one of the reasons I have such good inputs of inside information – provided I do not disclose where it comes from.

Three years of 5 – 10% compound budget reductions, across the board, saps the will to survive. You need instead to remove redundant operations to release funding for rapid payback, incremental, rationalisation and innovation to do essential tasks more reliably at a fraction of the current cost. You also have to retain and rebuild staff loyalty and user goodwill. 

The tactics that I currently recommend to achieve this include: :

1) Do a software audit (pehaps under the guise of anti-piracy and/or security) and chop all the unnecessary licences you find.

2) Do a disaster recovery exercise (blame it on the regulators or auditors if there is rseistance). It won’t work (they never do first time) but should enable you to flag low priority systems for the chop. It should also enables renegotiation with outsource suppliers who are not living up to current service level agreements, let alone what is needed today. But don’t go to law. Send your key negotiator on a CEDR “dispute avoidance” course (and suggest your suppliers send theirs as well)

3) Offer unpaid career breaks of up to two years, with a requirement for period of contact/updating in each year, plus funding for rellevant training (e.g. fees for a relevant full or part-time MSc), while ensuring that those on career break are outside head-count. In 1991 this was the most successful tactic for meeting head-count cuts through the recession,  reeling back-in those wanted when recovery arrived and slashing both redundancy and recruitment costs.

There’s lots more but I now have to go back to do a better job of planning my way through this recession than I did in 1991. That entails also reducing vulnerability to external shock. For example I now have broadband connections from three different suppliers from the office in which I am writing this. But two trunk their services to me through the same BT exchange (albeit they have yet to got down at the same time). However I have only one power supply and I now know (having just tested) that my battery back up will only last two hours. I had lunch two days ago with the CEO of one of the UK’s largest Disaster Recovery operations and was not re-assured to learn that I am less vulnerable than most of my financial services suppliers!    

However, I am also taking another look at the long term trends. Some of you may remember that I was one of the few who forecast not only the Y2K/Dotcom boom but also the bust that was to follow (“The End is Nigh, 1996 IT Skills Trends Report“). I did a similar analysis for my LEO essay on the next 50 years of Computing. I was persuaded to drop the sections on the likelihood of a 1929 style crash (I thought we were at that stage of the ICT Kondratieff Wave) because it would look too alarmist. I am now off to take another look at William Houston’s excellent little book “Riding the Business Cycle”.