With companies locked in an almost-constant battle with fiscal fluctuation, IT organizations are wondering how to best deal with the looming “what if” question of a recession. While it’s impossible to gauge economic success with 100% accuracy, it’s important that companies take steps to recession-proof their organizations from the harmful impact of major downturn.
Preparing for a Recession
IT departments are a vital cog in the elaborate machine that is an organization, and are often affected first by strategy changes or budgetary issues. Thankfully, much of the work involved in preparing for economic calamity provides benefits to IT organizations by making them more organized and productive, whether or not the recession comes to pass. Therefore, by investing in recession-proofing IT, companies strengthen their overall operations, enabling IT and other departments to continue working on revenue generation, cost control, product development, and communication.
However, since IT organizations manage an expanse of systems, networks, and applications — and have to pay the associated costs for those services — it is difficult to simply reduce expenses allocated to IT and move on.
Therefore, we’ve amalgamated a collection of tips from around the industry to help guide how to go about adjusting IT budgets to maximize output while still being prepared for the worst. Using these tips, IT leaders have an opportunity to protect their function and prepare an entire organization for the possibility of a downturn.
4 Tips for Recession-Proof IT
1. Prioritize & Focus
An IT professional is arguably involved with all aspects of an organization, so it is important to document and rank all areas of focus for the upcoming quarter or year.
To prioritize workflow, an IT admin should:
- Evaluate the entire IT landscape for their organization;
- See what should be prioritized;
- And understand what can be optimized.
Is there something that can be slated for a later date that could alleviate some of the financial burden weighing down an organization? Is the IT department allocating funds to pay for licensing that could be reevaluated for a less expensive service? Is there any on-prem infrastructure that could be migrated to the cloud – i.e converting capx to opex spend? These are only a few of the questions that should be considered.
During a recession, it is very likely that organizations will narrow their focus to prioritize what is most important, so it is always better to know what functions/areas can be delayed and which are a must. The market is cyclical, however, so prioritizing for the future can be difficult. It’s bound to change at some point, and desired areas for investment of the past may need to be prioritized once again.
2. Get Flexible
The more willing an IT admin is to adapt, the better. When it comes to vendors, IT professionals should aim for short-term commitments and contracts, allowing for the company as a whole to make changes quickly as needed. There is a counter-balance to this which is that generally, shorter-term engagements are more expensive, but that may be a small price to pay for increased flexibility.
Critical projects should also emphasize short-term focus, allowing for IT organizations to be flexible in their deadline and delivery. The focus should be on iteration and delivering value as quickly and often as possible, and although it may be difficult to let go of long-range grandiose visions, admins show real, tangible value all along the way — thus increasing the likelihood that budgets will still remain and be allocated to critical projects that are consistently delivering. The Agile methodology can help ensure that an IT organization is able to consistently deliver by breaking up larger projects into smaller ones.
3. Stick to a Budget
IT organizations can prepare for financial loss through organized, consistent delivery of slated projects. Generally, during downturns, capital expenditures are cut, so the more purchases that can be converted to operating expenses, the better. The big cash outlays responsible for delivering core infrastructure projects can be highly scrutinized, but solving those issues through modern “as-a-Service” opex-based solutions can be more cost-effective during a recession.
Differentiate between what is needed and what is wanted. Do research on what IT alternatives could cut costs while still delivering quality. Reorganize and adjust infrastructure to optimize what is currently being used instead of allocating funds to a new system or service. Remember that the bulk of IT budgets go toward maintaining existing systems and infrastructure, so that is the biggest opportunity to impact your budget.
4. Communicate Your Needs
Work with vendors and contractors as early in a recession as possible. It’s vital to communicate the need for cost containment and an open, honest conversation can go a long way. Most vendors and contractors are willing to take some short-term pain if there is a long-term partnership possible, and that line of communication is generally assuring to both sides.
Additionally, IT professionals should communicate critical purchases that need to be made well in advance to ensure that there aren’t significant hiccups. Especially during a recession, when budgets are often out the window, an IT organization doesn’t want to hear that their money was sent to another department. Providing that level of transparency helps companies as a whole budget better and remain flexible with IT needs.
Lay the Groundwork
IT professionals are a critical component to the success of an organization, and recession-proofing an IT department goes a long way to helping the company as a whole thrive through whatever financial hardships they may face.
Of course, every organization is unique, so there might be other actions that could be valuable for you to do prior to a recession hitting. Regardless, the process of discussing this with your team, vendors, and colleagues will leave you in a better position to handle whatever comes your way.
Interested in finding other ways to meet budgetary needs? Check out how IT departments can save money with JumpCloud®’s cloud directory services.