Managing IT during Global Economic Meltdown
October 8, 2008 by Raj Sheelvant
As the global economy collapses, companies are bound to trim spending to improve the bottom line. Since information technology is bucketed as cost, senior executives inevitably will turn their attention to IT budgets for substantial contributions. Earnings miss by SAP (read article here) indicates that both Multinationals and SME (small and medium enterprises) are nervous of the credit crunch and its impact on the global slowdown of economy. They are delaying their Enterprise Application Deployment.
Yet in some instances, IT investments deliver more value to a company’s top and bottom lines—by creating new efficiencies and increasing revenues—than any savings gained from traditional IT cost cutting. This according to McKinsey Article titled Managing IT in a downturn: Beyond cost cutting
McKinsey Survey has identified number ways technology investments that can have a substantial impact
• Manage sales and pricing. Develop insights into customer segments and improve pricing discipline to increase revenues without increasing prices.
• Optimize sourcing and production. Rethink supply chains and logistics to improve the scheduling of deliveries and inventory management.
• Enhance support processes. Improve the management and use of field forces (such as installers and field technicians) and of customer support centers.
• Optimize overhead and performance management. Sharpen awareness of risk exposure and improve decision-making and performance-management processes.
The article further says, to extract value from these opportunities, companies must make managerial improvements in two areas.
Developing new insights : Few companies have successfully capitalized on the explosion of data in recent years. Often this information, residing in separate IT systems or spread across different business units, has never been mined for insights that could add value. When such teams use the data to compare best practices across regions or to identify under- and overserved customers, for example, they can identify hotspots of revenue leakage.
Optimizing processes : As IT becomes tightly integrated with processes, breaks in workflows often get built into systems and diminish productivity. Shining a light on these areas with an integrated view of operations and technology may well surface problems, which often involve outdated processes, manual steps, redundancies, and bottlenecks. An 80/20 approach can highlight a modest number of activities that, when corrected, deliver a disproportionate amount of value. Companies can usually apply these fixes in short order. Adjustments to workflow processes may also promote greater adherence to corporate sales-discounting and bidding policies.
These findings by McKinsey, highlights the need for companies to have an IT strategy. Without well thought out IT strategy, any macroeconomic changes (as seen in the past few days) has a tendency to derail IT investment (be it in infrastructure like virtualization or software implementation like SAP). Companies that refuse to lose focus due to these short term distractions, and continue to invest in their IT, will in my opinion emerge much stronger at the end of this proverbial dark tunnel.
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