Cut, Invest, Lead: How CIOs Can Manage Through the Downturn
I followed up with John Sviokla on this post about the Don't Waste a Crisis report from Diamond Management and Technology Consultants. Sviokla, Diamond's vice chair and a former Harvard Business School professor, stressed the importance of IT investment during a downturn, but was clear that such investment will take place "in the context of cost cutting." And he said steady leadership in a time of crisis was a key to success.
A CIO has to have credibility coming in to the budget process, based on running a good shop and delivering good value. And she has to be willing to cut, rather than expecting to be the only department that avoids pain.
Where to cut IT expenses? A good place to start is rating the strategic value of applications, and tightening up on application management. Getting vendors to share capital risk makes sense, too, especially as they will be hungry for business. Also: make sure your infrastructure is as lean as possible.
But in the big picture, growth is the focus. If IT makes up 6% of a company's budget, it makes sense to use that 6% to go after the other 94%, he says, and to drive sales. Companies that do it right should see increasing gross margins and incremental sales increases to better customers. "It's about changing the economics of the business," he says.
One area where inefficiencies can be "huge": the customer side. If you can get to the root of problems that drive people to the call center multiple times, and deal with call center issues like abandonment, you can save real money.
How many companies will get it right this time? "My guess is about the same percentage as last time. There's more knowledge now, but also more fear."
That leads to a key point: leadership really matters. "The emotional tone of an organization flows from the top," says Sviokla. "If executives are showing fear then their people will be more likely to make snap decisions. At times like these, people who act rationally get the best results."