As 2008 continues to be overshadowed by the fallout from the US subprime market, banks are tightening lending and consumers are tightening their belts. But a market discontinuum is not universally bad news. Celona Technologies' CEO Charles Andrews argues that companies should hold their nerve and resist slashing IT budgets just yet.

The reality is that markets implode regularly and usually with good reason. While you might think that the $5 trillion of market value lost in the dot com crash of the early part of this decade would have taught a few lessons, recent bullish investment has resulted in yet another market "readjustment" in the US and UK. The current crisis is centered on the banking and housing markets, caused largely by over-inflated borrowing and subprime loans, but commentators say the knock-on effects will be much wider when consumers feel the pinch and tighten their spending. If you believe everything you read in the papers then it would seem we are staring into the mouth of recession. But while the outlook is still somewhat uncertain according to economists, we need to get this into context.

At peak the total number of adjustable rate mortgages in the US were worth around $1 trillion. A fraction of these are subprime and current conservative estimates say the damage is likely to total no more than $400 billion. That's a lot of money; but compared to the dot com wipe out, or as a proportion of US market capitalisation (around $16 trillion), it's manageable. In the UK the concern is that growth has been substantially funded by debt, leaving some sectors highly vulnerable, but the stock market is resisting a crash at least for the moment. In May the FTSE 100, for example, bucked the gloomy predictions on the back of high oil prices (which stimulated a rise in the energy sector), as well as positive announcements from a range of companies including BA, BT, Cadbury and SABMiller.

What this means is that if you're fortunate enough to be in a sector that's insulated from the current downturn, you very much need to keep the wheels on your current initiatives, since the reasons for these investments haven't evaporated overnight. But it also means that in sectors where attracting, retaining and upselling customers just got more difficult, it's even more important to innovate, which in plain terms simply means finding new ways of solving business problems. For the vast majority of firms key business priorities remain unchanged. These priorities are largely customer-centred and include attracting, retaining and upselling customers, targeting customers more effectively, expanding current customer relationships, and creating new products and services that will be attractive to customers. Other business goals, such as process improvement, reducing costs and increasing the use of analytics, are likewise simply stepping stones to improving the customer offer.