Considering all of the economists who somehow managed to miss the warning signs, CIOs can be forgiven for not predicting the recent global recession or being ready for it. But they may not get another pass in the event of another economic downturn.
That's the gist of a recent note by Gartner, in which Gartner fellow and VP Ken McGee says CIOs must have a plan if the economic recovery doesn't take, not an unlikely scenario given the continued high levels of unemployment and depressed housing prices in the U.S. and growing concern about the possibility of countries like Greece defaulting on loans. Says McGee:
Just the potential for a second business downturn should be sufficient to compel CIOs to plan for another business downturn.
The bad news, adds McGee, is that most CIOs will probably not have a response strategy. It should be easier to produce one than in prior years, given that most of them have recent experience in dealing with a shaken economy.
McGee doesn't come right out and say he thinks a second downturn is coming in the near future, but he "strongly urges" CIOs to be ready for it. He offers a list of five smart tips for doing so, all of which involve working closely with the business. This could be one of those relatively rare opportunities for CIOs to take a leadership role, one that could be huge in helping raise IT's profile.
- Call a C-level meeting. Don't wait for economists to start calling it a downturn before convening with C-level colleagues, talking about possible scenarios and considering some of the decisions that will need to be made.
- Focus on the current fiscal year. Look at IT projects scheduled and approved under the current IT budget to identify likely candidates for postponement and possibly even cancellation. Be sure to consider any contractual exposures that could come up with IT vendors.
- Similarly, once all projects for the next fiscal year are identified, CIOs should determine which of those projects may be postponed and which may be canceled. (While this makes particular sense in a time of economic uncertainty, it's not a bad strategy for any year.) Ditto on reviewing vendor contracts for possible gotchas.
- Use zero-based budgeting for projects. McGee says CIOs need to "strongly suggest" to C-level executives that all business unit executives sign documents affirming their understanding of the one-time costs that will be incurred to implement their 2011 projects and the annual recurring costs required to maintain them. (I expect at least some CIOs have tried to introduce this practice previously. They may have better luck now, since in theory business folks will be more receptive to partnering with IT with a shared goal of controlling costs.)
- Likewise, use zero-based budgeting for existing applications. McGee advises compiling an inventory of existing applications that are maintained by the IT staff and assigning an estimate of the annual cost incurred to maintain each app. Once calculated, have business unit executives sign a document affirming their understanding of the estimated annual cost for overseeing and maintaining them. (This seems like a great first step toward application consolidation, which I wrote about earlier this month.)