How CIOs Are Setting IT Strategy Amid Economic Uncertainty
They're watching costs closely, but demand for IT's also rising.
Passerini's staying flexible
As head of IT for commercial real estate developer Lauth Property Group, Jeff Ton has had to make the tough cuts many IT leaders have only considered so far. The macroeconomic trends hit real estate developers early, first with the slump in residential building, then in retail and office space. So Ton started the year having to cut IT staff and re-evaluate projects.
Yet the reality for Ton and others is that, in a slowdown, IT's often the answer--using technology to automate and get more efficient. For example, as Lauth sets its 2009 budget, Ton sees a document management initiative as vital for productivity gains in a paper-intensive industry.
Ton is spending more time with business-unit leaders to gauge their sensitivity to the economy, even talking with them about small purchases--say, $5,000 for software for the retail group. "It's these kind of small-dollar decisions that guide the larger ones," he says. "If they don't want to spend $5,000, they probably don't want to spend on a much larger one."
Given the potential for the economy to slow quickly, IT leaders must engage fellow execs and business-unit leaders directly. Otherwise, people assume a big-dollar project just has to get done. "Well, it doesn't have to, because the business didn't have it yesterday and the company still ran," Capital Assurance's Endris says.
Procter & Gamble CIO Filippo Passerini says his team is focused on two main areas in trying to "lead change" for the company: picking clear priorities that sync with business priorities, and being flexible enough so that IT pros can "flow to the work," as he describes it, as priorities change.
What else should business technology leaders do amid economic uncertainty? Here are other bits of advice we gleaned from more than a dozen interviews last week:
Have a playbook.
Emerson Electric's business planning includes creating "playbooks" that anticipate changing events, and IT follows a similar process. CIO Steve Hassell says the key is a "balanced portfolio of projects" prioritized by a variety of factors--cost, resources, technology, time frame, risk--so managers can see their choices as business conditions change.
Not the same old drill.
Three to five years ago, options such as cloud computing and software as a service didn't exist, says Shaklee CIO Ken Harris. But they take time to put in place. Which is why Harris' IT team is evaluating them now, in case a tougher economic climate forces spending cuts and new approaches. "If and when things tighten, it will likely happen quickly," he says.
Rogues are reality.
At Lauth, Ton knows his smaller IT team can't respond as fast as he'd like, so business units may start rogue projects outside IT. "Some of that you might have to 'allow,' to let the business go forward, but you don't want it to run rampant," he says.
Spectrum Laboratory Network, a medical lab group, has been growing 20% or more annually for years. But seeing a slight downturn in physician office visits, CIO David Moore is edging back some capital spending, pushing into next year upgrades to some 4-year-old servers. Emerson is continuing long-term strategic projects, including a global data center consolidation, but it's "biasing" its new-project selection over the next few quarters toward shorter-duration, lower-risk projects so the company can respond quickly to economic changes, Hassell says.
Honestly assess the company's attitude toward IT. Is IT a competitive advantage, where spending can help with business problems related to tightening credit and cash flow? Carl Weddle, IT director at Quality Trailer Products, knows the company sees IT mostly as a cost to be contained in a slowdown, so he gets why his team is being pushed to finish projects without additional funding, and why no new hires are likely. "It is hunker-down time," he says.
UNCERTAINTY = DEMAND
At other businesses, the uncertain economy only increases the demand on IT. At CME Group, formed from the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, futures and options trading hit their all-time high last month, with just under 1.6 billion orders in a week. So CME's not tinkering with its $175 million IT capital budget. CIO Kevin Kometer says times like these require even closer collaboration with business units, "making sure we meet their expectations."
Closer collaboration has been the megatrend of business technology this decade--embedding IT into the fabric of business processes, and forever erasing the line between "IT and the business." Leaders can't let this economic slowdown, whether it proves mild or fierce, set back that progress.
-- with J. Nicholas Hoover, Mary Hayes Weier, Stacey Peterson, and Roger Smith
Note: This article was changed to reflect Wells Fargo's counteroffer for Wachovia.
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