Business Technology Trend for 2009
March 5, 2009 by Raj Sheelvant
Economic Downturn always has an impact on IT and declining profits during recessions has a tendency to place tremendous pressure on IT budgets. CIOs usually are called on to rationalize projects, downsize organizations, renegotiate contracts, and seek out other cost-reduction opportunities.
But, this downturn is very different from t the last big downturn, in 2001, according to the McKinsey Article titled “Five trends that will shape business technology in 2009”. Today, Technology budgets are larger, businesses have automated more processes, employees make greater use of tech-based productivity tools, and e-commerce has moved to the core of day-to-day operations. At the same time, IT organizations have established better mechanisms to govern IT decision making and have consolidated local IT operations to cut costs. The articles categorically states that the combination of cost pressures and IT organizations that are leaner, larger, and more vital to company goals will have new implications for business technology in 2009.
Here are the 5 trends to watch out for in this global recession and impact on IT in 2009.
IT and corporate finance converge: The year 2009 will be a tipping point for the CFO’s involvement with IT. In a world where capital is at a premium, CFOs will seek to use IT assets as a lever to generate cash. Successful CIOs will give the senior-management team practical ideas on how to optimize cash.
Tension around IT budgets increases: Since 2001, IT capabilities have become ever more strategically important for most sectors. Yet IT budgets in many organizations will come under tremendous pressure in 2009, reducing investment for new business capabilities. Successful CIOs will have to position themselves as honest brokers, pushing hard to evaluate IT investments in a fact-based way yet avoiding any perception of being allied with one business unit or another.
The “last” IT project? While it’s clear that technological competence is critical in most industries, the variation in returns on IT investments is daunting. Senior executives at some organizations that have used IT less successfully in the past will probably throw up their hands and shut off all discretionary IT projects for the duration of the downturn. The most effective course will be for CIOs to explain what it would take to improve the value equation for IT investments.
Regulators demand more from IT: Government scrutiny of business will intensify in many developed countries and policy makers and regulators will probably demand that IT systems capture more and better data in order to gain greater insight into and control over how banks manage risk, pharma companies manage drugs, and industrial companies affect the environment. Government officials also will monitor many legal and business rules more closely to ensure compliance with mandates. Successful CIOs should enhance their relationships with internal legal and corporate-affairs teams and be prepared to engage productively with regulators.
The offshoring and outsourcing landscape shifts: Just as the 2001 downturn led to a surge in offshoring, the 2008 downturn will also have far-reaching effects. New entrants will grow rapidly and some players could experience significant reverses. Successful CIOs will manage their vendor relationships as a portfolio so they will be well positioned as new winners evolve.
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