By Cassa Niedringhaus Posted October 29, 2019
Concerns about a recession have mounted in recent months. Even if it’s not imminent — Bloomberg recently projected a 27% chance of a recession in the next 12 months — information technology leaders can take steps to prepare regardless.
Recessions challenge enterprises, leaders, and employees, and nowhere can that pressure be more intense than in an IT organization. CIOs face pressure not only to support the company’s plans and goals but also to ensure their IT organizations function properly, even in the face of a recession.
IT systems are more critical today than ever before. They effectively run revenue generation activities, produce required financial and compliance reports, and automate manual tasks to increase efficiency and save money. Hardware, software, and other IT resources power the work of just about every employee, and CIOs are at the core of technology implementations and strategy during a recession.
In this guide to surviving a recession, CIOs can begin to implement a game plan now to weather a slowdown whenever it might occur.
Get Ahead: Build Communication Pathways
CIOs should be proactive by devising a plan before a recession begins. Start by standardizing procedures for each department. Steps could include, for example, identifying alternative solutions in high-cost areas to free up cash flow, procedures to take on-shore activities off-shore, and processes for deprovisioning IT solutions and technology that aren’t needed anymore but cost real dollars.
This way, you can communicate to your peers that you can help them execute their plans — a key exercise in trust-building and creating camaraderie — and be ready if the time comes.
In examining how companies fared after the Great Recession, research company Gartner found various strategies that helped companies outperform their peers and continue to succeed afterward, including advance preparation.
The company advised: “(N)either a ‘wait-and-see’ approach nor defensive cost-cutting will power you through adversity — not least because today’s current state of uncertainty won’t magically disappear. There is little clarity on a range of economic, regulatory, geopolitical and trade issues, and digital disruption has anyway made widespread and multidimensional uncertainty the new normal.”
Communicating and putting together a plan will help you coordinate with other departments and leaders, as well as enable your organization to respond quickly should the need arise. It might not be a blueprint, because you need to be agile enough to respond to specific circumstances, but it can serve as a framework to guide decision-making.
Identify Core Infrastructure Components and Plans
Company leadership might target IT programs during a downturn, and CIOs should identify which core systems need to stay in place regardless of the markets.
You should identify and categorize every project your team is working on, decide which functions are critical to success, and communicate those needs so your colleagues have clarity about the core parts of your IT organization and how changes would affect them.
You should also, as noted in a Harvard Business Review report, be strategic about cuts. Companies should neither be too defensive nor too aggressive. Instead, they should strike a balance between loss avoidance and investment.
According to the report, the “CEOs of pragmatic companies recognize that cost cutting is necessary to survive a recession, that investment is equally essential to spur growth, and that they must manage both at the same time if their companies are to emerge as (post-recession) leaders.”
CIOs can take the same approach in identifying where to make cuts and where to make strategic investments. An organization stripped to its technological bones likely won’t recover from a recession as quickly as one that makes the right strategic investments.
Enroll Teams and Vendors
Going through a downturn is difficult, and you’ll need the support of your team and your vendors. Partnering with both of those constituencies is critical to success.
If you are able to bring your team into the fold to understand the organization’s recession strategy, they will be more likely to give you the support that you need to execute it. Especially in an organization combining cuts and investments, this line of communication is key, according to the HBR report.
Its authors write: “Cutting budgets in one area while expanding them in another means explaining to those who are being asked to bear the burden of the former why the company is spending where no immediate benefits are apparent.”
With your vendors, establishing open and honest dialogue early can help them adapt to your needs. Vendors generally want to be good partners and are often willing to share in the burden as long as they feel they will be valued and treated fairly long-term.
You’ll also be able to turn to them again as the economy recovers. Spiceworks analysts in mid-2009 found that almost 30% of surveyed SMB IT organizations reported having to cancel one or all projects or purchasing plans for the year. However, that did not remain the case for the entire year: 68% planned hardware purchases, 51% planned software purchases, and a majority planned for hardware and/or software upgrades in the remaining half of the year. This illustrates that, though organizations faced cutbacks during the recession, they still planned technology purchases and upgrades in the latter half of 2009. Communicating early and often about your needs and how they might fluctuate can help you avoid burning bridges with vendors.
It never hurts to share the challenges and problems you are trying to solve with those around you who can provide support.
Share in the Pain to Build Alliances
There’s no doubt that things will need to change during a recession. The more you can show you’re on board with change and can even initiate it on your team and in your organization, the more you will end up building alliances with peers and colleagues.
They’ll see you leaning in to find a way to help the organization succeed long-term, and they will have no choice but to join you in that journey. If you are attacking the problem together, the enterprise is more likely to come out the other side stronger.
There’s no playbook that cuts across every organization to handle a recession, but these are some core principles that can work in your organization.