The problem with being a market analyst is that nobody will ever thank you for being overly pessimistic. So when a market analyst drops massive hints about a downturn well before the event, perhaps he’s worth listening to.
Gartner Group research fellow Mark Raskino forecast the recession in his research notes for some time before it happened. More recently, he and fellow Gartner analyst Kurt Potter briefed 50 CIOs in February on the theme of ‘Economic Downturn – Implications & Strategic Decisions for IT’ at its UK HQ in Egham, Surrey.
So what does Raskino say about the current predicament? Nobody can safely say when the downturn will stop, he admits, but we can safely predict that CIOs had better moderate their behaviour this recession.
At the Egham event, Raskino issued a dire warning about the extreme circumstances facing executives in the current economic climate. In short, his advice could be paraphrased as ‘stop posturing and start slashing’.
If Raskino’s hard-hitting conclusion shocked any of the CIOs in the audience, none of them took him up on the criticism in an open session later. In what seemed like an attempt to be cruel to be kind, Raskino told the assembled IT chiefs that they had to stop making four common mistakes, which could become disastrous as tensions mount during the downturn.
“Stop hunting cool projects and get back to basics,” was one stark piece of advice. Later, when CIO spoke to delegates, it was impossible to find a single one admitting to making ‘vanity projects’ a priority when he’d planned his strategy for 2009.
“I work in the public sector, so none of that would really apply to me,” said David Tidey, assistant chief executive for business change at the Royal Borough of Kensington and Chelsea. “Still, it was reassuring to see that some of my own conclusions were shared by him.”
Honesty the best policy
Enforcing the message that the era of greed was over, Raskino told the audience to “stop asking for new tools for now if what you have will do”. More controversially, he advised that CIOs should stop “trumpeting faux results”, namely the practice of taking credit for business-as-usual uptime. This will irritate, he warned.
The fourth biggest source of resentment caused by CIOs is “internal turf wars”, said Raskino. Office politics is not a good idea in the current climate that is friendly to mergers and acquisitions, he explained.
Business survival issues to focus on will be cost restructuring while defending the business’s revenues and cash.
Another problem, he argued, is that the pillars of received wisdom are crumbling. Ideas that property is a safe bet, that the booming Chinese and Indian markets will create demand that will fuel our economies, and that Europe won’t catch the US cold have already been proven erroneous.
Also, now that it’s been proven that private equity, light-touch regulation and risk management tools were not panaceas, Raskino had a series of warnings for anybody remaining confident.
Firstly, he warned that some may see the recession as the ideal time to take the IT department down a peg or two. He cited Citigroup’s bid to take 20 per cent off its cost base by slashing the IT budget. CIOs should be aware that, as the recession bites, the argument that IT is a cost, rather than a strategic tool, will be increasingly popular in the boardroom. Already, Raskino pointed out, 60 per cent of business leaders surveyed by Gartner think their IT capability constrains them.
Raskino argued that IT is one of the most resilient investment areas, and he has the figures and the charts to back this up. Whether CFOs will be impressed enough to resist slashing IT expenditure is a moot point however, with western Europe IT spending expected to be down two per cent in 2009. The trick for IT chiefs will be to show that the CIO’s priorities are in line with the business’s objectives.
The big issues facing CEOs and CIOs alike are hasty write-offs, loss of business trust, global instability, major regulation and the rise of a new financial order. Each on its own is a potential nightmare for the CIO, but added together they could cause a lot of sleepless nights.
Laying down the law
Regulation could be the biggest of them all, the audience heard. After years of light-touch regulation, we can expect an avalanche of measures beyond the torrent of rules and regulations accelerated by the Enron scandal. The good news is that the red tape won’t come just yet, because of the gestation period required by these new measures. “You can’t frame a new law that quickly,” said Raskino, “but you might want to be cautious and reserve your regulation budget.”
If there was one really powerful piece of advice to take away from this event, it was that CIOs must remember to be prepared for better times, said Mike Russell, director at engineering and design consultancy Atkins Global.
“Being reminded to plan for the return to growth early [was useful],” Russell said. “While managing the decline and doldrums is important, don’t lose sight of the need to be shovel-ready on the other side.”
Raskino had earlier coined the term ‘shovel-ready’, for projects that have already been signed off and which can start immediately so long as budgets have been approved.
Sadly, nobody knows when the recession will end, how it will end, or how we will emerge from the ruins.
“There are many saying that this is so different to recessions we have seen before that we should look at it as a recalibration. It would be interesting to have had an open-forum debate about what will be different about the world after the recession,” said Russell.
CIO 2009 Priorities
1 Business intelligence
2 Enterprise applications
3 Improving enterprise workforce effectiveness
4 Legacy application modernisation
5 Collaboration technologies
6 Networking and voice/data communications
7 Technical infrastructure
8 Security technologies
9 Service-oriented applications and architecture
10 Document management
Source: Gartner Worldwide CIO Survey 2009
Business 2009 Priorities
1 Business process improvement
2 Reducing enterprise costs
3 Server and storage technologies
4 Attracting and retaining new customers
5 Increasing use of information/analytics
6 Creating new products or services
7 Targeting customers and markets more effectively
8 Managing change initiatives
9 Expanding current customer relationships
10 Expanding into new markets/ geographies