Riding Out the Storm

April 16, 2009 by Chetan Jain, SAP Consulting

IT industry and the economic crisis Until now the IT industry was a safe haven in difficult economic times. But the current financial crisis seems be hitting the sector hard. Is this the end of the golden age? Experts say “no”!

Productivity and growth have long been the major selling points of the IT industry—some would say now more than ever—but the economic downturn has added a new dimension to customer demand. While growth is still high on the wish list, for most companies the priority is stabilizing revenue. Optimization and efficiency are the new buzzwords, and IT vendors are being called upon to help enterprises manage their costs and unlock hidden business potential.

Making IT count

As companies start to feel the pinch, many will look hard at their existing IT landscapes to squeeze out what value they can from their current investments. Internal measures such as optimizing hardware usage, activating unused software, and deploying standardized solutions in favor of expensive developments can reap considerable benefit. As resources become scarce, underused solutions will also come under scrutiny, with the aim of rationalizing and freeing up valuable hardware and resources.

For those looking for additional IT support, solutions offering rapid time-to-value and easy implementation will find most favor. For example, Supply Chain Management solutions that drive efficiency in logistics, or Shared Service Centers that consolidate administrative processes, offer cost savings with a quick and visible impact. Enterprises will also look to IT as a means of generating cash flow. Business Intelligence solutions provide valuable insights into the efficiency of cash collection, while price optimization solutions uncover discrepancies and pinpoint the potential gains of re-alignment.

IT “mega-projects” have seen a sharp decline since the days of the dot-com bubble. This is set to continue in the current crisis, as enterprises opt for smaller, more focused projects. Larger implementations will see a lower-risk phased approach with shorter project cycles and incremental gains. Fixed-priced projects are also on the up, as Chief Information Officers look for greater predictability in their budgets and closer alignment of costs and results. This is increasingly important in the internal justification of IT projects, where every dollar spent is being scrutinized for its value and return on investment.

Lightening the load

Technologies that go some way to relieving the burden of running and managing IT solutions in-house will gain further traction in the current market. Outsourcing looks set to widen its reach, with companies previously hesitant to embrace the model now more inclined to make the transition. This trend will see enterprises outsourcing more of their non-core operations, or consolidating administrative tasks in Shared Service Centers.

Virtualization technology promises savings on the hardware front, reducing the number and type of servers an enterprise needs by sharing single server resources across multiple environments. Cloud Computing takes servers out of the equation entirely. Enterprises rent space on virtual servers, accessed via the Internet, tapping into data centers to run their applications remotely. Customers pay only for what they use, and as with virtualization, stand to make considerable savings on personnel resources and internal facilities such as lighting, heating, and ventilation.

This type of technology also helps enterprises “go green”. Far more than just a trend these days, green technology creates value on both a business and environmental level. Efficient use of resources not only reduces a company’s carbon footprint and enhances its corporate image; it also reduces costs. Using innovative technology to manage resources such as transportation systems, production plants, or internal facilities presents huge potential to save on both CO2 emissions and operational costs.

At your service

Efficiency is also the name of the game in a service-oriented architecture (SOA), along with business agility and control – three good reasons why adoption can only increase in the current market. By linking heterogeneous systems and simplifying the software landscape, SOA enables fast development and deployment of new business processes. Costs go down and flexibility up. Enterprises can adapt quickly to changing and challenging environments, shaping their software to fit their business.

Software as a Service (SaaS) is a similar story. Sales are increasing at pace and the upward trend looks likely to continue. The main attraction is the upfront savings to be made in hardware, software, and facilities. The pay-as-you-go subscription model also gives companies the flexibility to scale their investment as business grows, as well as the reverse scenario of managing costs during a slowdown. Similar models are springing up across the industry, as vendors step in to support customers with more flexible payment plans. Some are even helping to arrange finance for critical projects.

The customer is king

Customer retention takes on increasing urgency during times of crisis. Solutions that foster better customer service and relationships are essential to maintaining a strong customer base. Efficient technology is also key, freeing up sales and service personnel to spend more time with customers. For example, with an effective sales management tool that provides a 360-degree view of the customer, sales staff can enjoy more informed customer interaction, identify opportunities for up-selling and cross-selling, and gain intelligent insight on how to best manage spending for maximum sales.

This takes us full circle – back to the issue of “credo” or consumer confidence. Good customer relationships are built on trust and, if managed correctly, can be sustained in even the most challenging of business environments. When the chips are down, proven solutions and reliable partners are what really count. In times of economic uncertainty, enterprises will not stick their necks out and take a chance on new technologies, let alone vendors that might not stay around to honor their commitments.

When the dust settles and the upturn finally comes, there seems little doubt that the IT industry will have undergone fundamental and lasting change. Like the rest of the business world, IT vendors are re-examining their core value propositions and focusing on solutions that add measurable and ongoing value. Understanding the difference between technology investment and expenditure has never been more important. One thing that is clear is that the right solution at the right time could help companies survive—and even thrive—during recession.

Wirtschaftskrise

Chetan Jain

is a Project Manager with SAP Consulting. With over thirteen years of international consulting and industry experience at various management levels, his expertise ranges from business transformation, and sales and marketing optimization to large-scale system delivery projects.

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