2 Juni 2009 | A comment by Per Andersen, Managing Director, IDC Nordic 

It’s not always fun to open the daily newspaper. At the moment, there are a lot of headlines about the financial crisis and economic downturn. Everyone agrees: the 2009 economy is in recession. In their evening prayers, economists are praying there’ll be flat growth in 2010 and no further fall in the gross national product.

Businesses and organisations need to gear themselves up for recession. While some businesses are already feeling the effects of the economic situation, others are preparing for a scenario that’s very different from the one they had in mind when they prepared their 2009 budgets.

All businesses and organisations are now finding themselves forced to consider how the recession will affect them.

What are the challenges facing the chief information officer (CIO) in the present economic climate?

CIOs have to focus on two things: IT costs and effective IT business support.

Virtualisation

A reduction in IT costs often results in better utilisation and operation of a company’s existing IT resources. Virtualisation is one of the areas currently receiving a lot of attention. If more capacity can be drawn from servers, networks and software, investment costs and ongoing expenses will fall.

At the same time, virtualisation is a prerequisite for further changes to IT operations. Many companies view the consolidation of data centres as an obvious opportunity to reduce operation costs. Such consolidation is much easier if the equipment has been virtualised.

Management tools and automation

Another cost is in operating the IT and new virtual environments. That’s why there’s a growing need for management tools and the automation of operations. Increasingly, we’re seeing investments in areas such as performance management software, help desk automation, storage management software, change, configuration management software and network management software. These are just some of the many management tools available for optimising IT operations.

We are also seeing an increase in the implementation of ITIL and similar service tools at the moment.  

Outsourcing

Some companies ta ke an extra step and outsource their operations and/or development and support. This often leads to large savings, and at the same time the need for initial investments in solutions (capex) falls, which can be an advantage in the current recession.

Offshore activities can often be an important element in outsourcing. Many companies currently use a hybrid model, cooperating with a local supplier of offshore resources instead of attempting the relatively complicated offshore process themselves. Experience shows that offshoring takes time and money to establish, which is why it’s important to draw on what other companies have learned. 

Priortise your IT projects

As far as business is concerned, there’s no doubt that the credit squeeze has led to a more rigid prioritising of company IT projects. Now having good tools is even more important to help companies prioritise and complete key IT projects.

Prioritising IT projects requires a sound governance structure and, in particular, a formalised collaboration between IT and business units. The parties must agree on how to prioritise the company’s project portfolio. Often, prioritising is left to the business units, but it’s important that the CIO acts as a sparring partner, so that the company’s IT realises its full potential. 

Business cases

One way to obtain a good basis for decision-making is to work with business cases. This is a formal statement of the expenses and advantages of a given project. There are many ways to do this, but it’s important not to get lost in detailed calculations that have no real influence on the final decision. When working with business cases, it is not always easy to quantify all the advantages as each project is so different in character.

It’s important that the business case is not only a basis for decision-making, but also a project management tool. With regular follow-up at key milestones during a project, you can ensure the goals are achieved or identify where and when there are discrepancies.        

Five key tips

Advice for today’s CIOs:

• Consider reducing IT costs through virtualisation and consolidation to help achieve a more effective use of existing company IT resources
• It’s crucial to invest in the necessary tools for the management of new IT environments
• Consider outsourcing and offshoring, but be selective and consider where they will have the biggest effect. Take advantage of the experiences of other companies in your market, particularly where offshore activities are concerned
• Take a (fresh) look at governance in the organisation and make sure there are solid grounds for business units and IT to make the right decisions about project prioritisation
• Remember that while business cases are good tools, the real world does not always behave the way it should. However, business cases are useful as a management tool both during and after the project

Source: IDC