Slowing growth may lead to a recession this year, and some pundits urge CIOs to be ready to cut IT budgets by as much as 10% on a moment's notice if the sky begins to fall. But it's that sort of all-or-nothing mind-set that drove dramatic overspending in 1999 and most of the bad IT investments of the past decade. It's time to move beyond our binary "on, off" thinking.
First, let's consider infrastructure investments. In all the years we've been helping IT teams justify projects, we find the biggest challenges are with network and computer system infrastructure. No wonder, when one in three of these initiatives doesn't deliver value. Too many IT teams still take on over-the-top projects to get recognition, are too lazy to consider simpler (and cheaper) solutions, or are oversold by slick vendor account managers.
For example, we recently looked at a project in which a team wanted to buy all-new $6,000 routers instead of upgrading at $200 a pop. The team spent $500,000 because the network engineers thought it would be more interesting to check out cutting-edge routers. With one in three infrastructure projects a boondoggle, one bad decision more than cancels out the two good ones.
Quick tip: Before approving a new infrastructure investment, especially in lean times, ask yourself two questions: Will the business notice? Is there a less costly alternative? Put another way, try explaining to your mother why you need the technology. If Mom doesn't get it, you haven't built a clear business case.
The Mom rule also works for application projects, but you'll want RID to be your main guide. If a project involves replacing, interrupting, or disrupting an existing application or project, it's not a good bet in an economic downturn. RID projects aren't necessarily bad; they just carry more political and capital risk than other initiatives. This isn't the year for an accounting system upgrade that requires retraining, a mass migration to Vista, or a forklift replacement of PCs that still do the job.
So where should you be spending amid economic uncertainty? Every organization must consider one area: on-demand applications. Why? First, a low initial capital investment (no hardware and small-scale implementation costs) and rapid deployment will accelerate payback so financial capital can be reinvested in other projects. Second, because you're not buying licenses, you can scale up or down on user accounts if your business changes. Third, because you're probably not financing the project like a capital investment, you don't have to worry about how interest rate fluctuations increase the financial risk.
There are political, security, cultural, and other reasons you may not want to go the on-demand route. But the climate's changing. For example, we analyzed an on-demand CRM deployment for a large private wealth management firm that usually builds and manages everything in-house. The firm recognized that it could develop and deliver apps faster and spend fewer ongoing resources supporting software. We're also seeing more health care institutions--very conservative about data privacy and security--adopt on-demand to improve performance with limited IT resources.
Finally, after you've spent the morning building business cases for your projects, spend the afternoon talking with your team. In a downturn, your greatest assets--your people--are even more critical, and they'll feel their skills and knowledge are undervalued amid rumors that IT is going to be cut. In reality, no organization can survive without IT. While a mistake in sales or marketing may go unnoticed, individual help desk, developer, network administrator, and other IT failures can have a global impact. Quick tip: A small investment of time spent reassuring and motivating IT staff will deliver the greatest ROI this year.
Rebecca Wettemann is VP of research at Nucleus Research, a global provider of IT research and advisory services.