How recession-proof is your IT budget?

As uncertainty grips the economy IT departments need to budget for possible recession – with storage key to helping the business through hard times.

For the past two years the world's stock markets have been characterised by volatility. Aggregate share values climbed and fell from day to day, but generally the dips were followed by rises. That's all changed now, and as the effect of the US credit crunch has rippled out across the world it brings the prospect of a slowdown in business to other economies.

Recent headlines have been dominated by news of markets plunging and report after report has declared recession to be on the way. Just this week the Deloitte Economic Review said the UK economy is set to experience its weakest period of growth in 15 years with the risk of a recession in the next 24 months.

So, what does that mean for IT, and for storage in particular? Well, the short answer is that it depends. It depends on the business sector you are in, and whether that will be hit by general economic belt-tightening, such as big ticket consumer goods, or relatively immune, such as healthcare, which may only suffer further down the line as tax revenues shrink. It also depends on the extent of any downturn – while some commentators predict only a slowdown in growth, others have predicted another Great Depression.

Storage often escapes hard times, because whatever project is completed requires it.
Jonathan Kamminga
Solutions consultantHitachi Data Systems
But, while the precise effect of a recession on a business and therefore on its IT department is a case of 'it depends' for now, there are some general guidelines that can help IT managers prepare for the coming year. Key to this is the concept that IT should be aligned with the business, says Najeeb Ahmad, technical projects and support manager with workwear provider Sunlight Services, who expects his business to weather the storm well owing to its diverse client base.

"IT managers may need to recalibrate their budgets, but that will depend on what sector they are in," says Ahmad. "If they are in retail then obviously they could be affected quite badly and would need to know how to scale back plans. IT needs to be aligned to the business and if the business shrinks then IT has to be scaled back with it."

Uncertainty about the future means making plans can be almost impossible. One solution suggested by analyst group Gartner is to develop two IT budgets – one that assumes business as usual, the other a 'recession budget'. Gartner recommends that such plans should target a decrease in IT spending of at least 10 per cent below 2007 levels.

Just cutting costs is of course a valuable plan to have in case recession hits. But what elements of IT are ripe for slashing and what should be prioritised in case of economic hard times?

In general, it's a case of prioritise what you must, from both a legal and commercial point of view, says Sue Clarke, senior research analyst with the Butler Group.

"IT leaders should first address any compliance activities to ensure that they are able to meet the requirements of current and upcoming regulations or legislation. Secondly they should prioritise activities that can provide the quickest returns or the greatest benefits to the organisation in terms of improving its efficiency," she says.

Just as consumers don't plan expensive house alterations if redundancy is on the horizon, businesses don't tend to shell out for major projects when hard times come. So, the first things typically to suffer in a recession are major projects, which could be an infrastructure change such as the implementation of a SAN, or a consolidation exercise that requires capital expenditure.

But, some major projects will have to go ahead if they are dictated by the regulatory or competitive environment, says Jonathan Kamminga, solutions consultant with Hitachi Data Systems, and often storage is integral to those projects.

"The one thing that will continue to grow and be ring fenced from budget costs will be e-commerce, which cannot be neglected as we move deeper into the 21st century," he says. "Also, any project that has the scrutiny of industry watchdogs - auditing, compliance, data protection.... Any project that has the focus of the markets and could affect the share price will also be muscled through pretty much regardless of the cost."

He adds, "Storage often escapes hard times, because whatever project is completed requires it. Also, business as usual activities will inevitably require more storage."

While there may well be elements of a business's IT set-up that are untouchable that doesn't mean they should be the only projects to progress under straitened conditions. For the forward-thinking IT manager looking for recession-proofing wins there are technology projects which can help cut costs by increasing utilisation rates, says Hamish Macarthur, chief executive of analyst group Macarthur Stroud International.

"Technologies that can bring great cost savings and deliver ROI are virtualisation along with thin provisioning and data deduplication – these are all ways to address consolidation and disk usage and cut down on the amount of servers, storage, management time, power and space a business needs to expend," he says.

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