Recession-proof your IT strategy

As the IT industry faces up to an increasingly harsh economic climate, what can be done to lock out recession?

As the IT industry faces up to an increasingly harsh economic climate, what can be done to lock out recession?

With companies across the globe laying off staff, pulling contracts and reducing costs at every possible turn, the IT industry is suffering as budgets are cut, projects are put on hold and there is a hesitance to buy new hardware and software.

"When you go into a global slowdown, as we are seeing now, the first thing that gets hit is IT. Projects get frozen or put on hold. There's a knee jerk reaction says Martin Sajkowski, vice president of international sales at Scalable Software.

But the scale of impact and the measures that can be taken to protect your IT infrastructure vary greatly, depending on whom you speak to. However, many argue this is a good opportunity to get a hold on your IT infrastructure costs.

A couple of years ago when everyone was scrambling to ensure their IT systems were Y2K-compliant it became clear that most companies did not have a clue what systems they had, or what software was installed.

"What you should be looking at is ensuring that the products you use, or will be using, actually fit the real needs of the organisation," says Andy Kellett, senior research analyst at the Butler Group. "You have to examine what you are looking to get out of a product and how you are going to get ROI that will make it worth while."

Research conducted by the Butler Group has found that last year in the US alone 13% of IT expenditure, amounting to $90 billion (£62 billion), could be attributed to unnecessary spending.

One response to this discovery would be to can future projects until the economic climate has improved. However, this method carries with it the risk of falling behind the competition and coming out the other end of the recession with an outdated IT strategy.

An important lesson learned from the recession of the early 1990s was the benefit of outsourcing, points out Pete Foster, principal analyst with Ovum: "Outsourcing is one of the few areas that has maintained its business over the year so far. If you're using an outsourcer, it's much easier to accommodate changes in your business. Outsourcing started taking off in '92 and I think that's one of the main lessons learnt from the last recession," he says.

For those who deem it better to keep IT in-house, now, more than ever the critical factor is to treat IT as an integral part of the business, says Francis Walsh, divisional director of technology at the Nationwide Building Society. "The IT strategy and the business strategy have to be very closely aligned," says Walsh. "What I think we'll [Nationwide] see in line with the rest of the UK is an increased focus on costs, but there will be no draconian measures."

What has been very evident to date has been staff cuts among IT vendors and also those industries immediately affected by the aftermath of the US terrorist attacks, chiefly the airline industry. It is unclear yet to what extent IT departments within other industries will be affected.

"In times of recession people tend to react late, and if this is the case you have to make savings quickly which means reducing your headcount," says Ovum's Foster.

It should also be borne in mind, however, that reducing staff numbers is not a quick fix. It costs money to make people redundant, especially if they have been with a company for some time. Sajkowski argues that sometimes the cost of getting rid of staff outweighs the cost of keeping them.

So is early planning the key to weathering the IT storm? David Rippon, chairman of Elite, the British Computer Society's forum for IT directors, believes we just have to grin and bear the recession, and nothing can be done to safeguard the IT strategy in times of gloom.

"It [recession-proof IT strategy] is an ideal people would love to have," he says. "At the end of the day, the budget will be cut and you have to cut down on IT spend and try to hang on to people for as long as you can. I'm not sure there's anything you can plan about recession. At the end of the day a business has to be profitable, and if you have to trim your organisation to meet the money available, you have to do what you can."

Read more on Business applications