Forrester Research CEO George Colony calls this the "gateway recession," the end of the line for business as usual and the true beginning of the digital economy, where everything from innovation to customer relationship building and brand loyalty will be turned upside down.

This recession will be particularly disruptive for the business technology organizations that underpin the digital economy. In the previous post-dot-com recession, IT was taken to the woodshed for a lesson in fiscal responsibility--the calculus of ROI and the art of "doing more with less." Today's recession calls for a much deeper and more disruptive self-evaluation, where tech organizations must (finally) reduce the 70% to 80% of their budgets that goes to system upkeep to free up more money for investments that tilt the competitive playing field. The brightest CEOs and boards of directors will stand for nothing less. (We'll be exploring these issues in depth with CIOs and other CXOs at the InformationWeek 500 Conference, Sept. 13 to 15 in Monarch Beach, Calif., under the theme "Navigating The Boardroom.")

David Thomson, an expert on the attributes of high-growth companies, says the challenge for CIOs in a recession isn't to cut their spending from 2.1% of revenue to 1.9%. It's to change the spending mix. Leading growth companies understand that CIOs must invest more of their budgets in systems that drive growth and boost the efficiency of other company departments, whether supply chain, sales, or product development, so that when the economy turns, the company is even better positioned to bury its rivals.

New architectures and business models are in play to change that spending mix, from virtualization to software as a service to offshore outsourcing. One Fortune 50 CIO recently told me that he almost welcomes a downturn every five years as an opportunity to overhaul the IT infrastructure to position the company for the next growth wave.

This gateway recession is also an opportunity to change the culture from one that's internally focused on "user" co-workers to one that's externally focused on paying customers. At its best, business technology is an instrument to deliver more revenue and profits. The most valuable tech pros are customer-facing retailers, bankers, brokers, and shippers, not just IT trench dwellers. And as such, they're less vulnerable to being outsourced or laid off in a cost-cutting binge.

Another "gateway" realization is the need to give customers, partners, and employees freer access to one another via social media, Web 2.0 collaboration tools, consumer devices, and other "contraband" systems. As industry regulations get stricter and the world gets more menacing, the impulse is to move in the opposite direction: Lock down everything! But even the most regulated companies realize they can't wrap their processes and information assets in a hermetically sealed pouch. Colony tells of the defense contractor CIO who recently said he's far more concerned about making the company attractive to young people accustomed to using the latest tech tools than he is with losing sensitive information to leakage. Clearly, there must be a middle ground.

Of course, it's easy to oversimplify the transformation at hand. Organizations don't change overnight. But just as every CEO must kill certain businesses or reengineer them every five years, says HCL Technologies CEO Vineet Nayar, so must CIOs turn their own organizations upside down.

Rob Preston,
VP and Editor in Chief
rpreston@techweb.com

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