FSN: Getting the most out of IT in the Credit Crunch

Getting the most out of IT in the Credit Crunch

21st April 2008
As the credit crunch starts to bite businesses are weighing up just what to do with current software deployments and how best to tighten their belts effectively. Mark Dye , FSN Contributing Editor reports.

Many of us are facing uncertain times right now as the global credit crunch starts to bite. The slowdown in the financial sector, stoked by a meltdown in the sub-prime market, has proved to have far more reaching consequences than many first thought.

Markets are jittery and budgets are being slashed, so it comes as no surprise to hear the analysts predicting a slowdown in demand for IT project services either. Ovum is expecting that this trend will continue, with things slowing in both private and public sectors until 2011 as many institutions postpone initiatives, put software upgrades on hold, or just cancel plans outright.

Of course, testing times leave us questioning our priorities and this is no different for the clever CIO going about his work. Indeed, for some the current ‘bite' on resources may bring about changes that actually benefit the business for some.

“ Being agile and innovative is often the most effective way to chart a course through the pitfalls of recession," says Woodson Martin, vice president of EMEA, salesforce.com.

Richard Muirhead, CEO of Tideway Systems, agrees, pointing out that there has also been an increase in demand for software and services that help consolidate and optimise existing resources, forcing them to work harder and smarter for maximum payback.

And as budgets continue to feel the squeeze, he believes vendors will be forced to clearly demonstrate a return on investment (ROI) while at the same time helping firms identify and address those issues they are most interested in tackling first, with lab tests and reference visits becoming even more critical in this process.

“On the upside,” he says, “it could give them the opportunity to make their roles more strategic to the business. If they invest in the right technology that lets them operate on intelligence rather than guesswork, they can make strategic decisions or changes with the confidence that they understand the impact it will have on the business.”

Ian Kilpatrick, chairman of security specialist Wick Hill Group, says that he has seen ‘a move to quality', with companies buying into well-known security brands.

“This is logical and we saw this in the last credit crunch,” he adds. “You don't get sacked for choosing the quality brands.”

The current malaise means that plenty of organisations are already having to redirect their attentions and place a greater focus on core applications.

And as Duncan Ash, EMEA business development manager at Sybase attests, this will make many look at different ways of paying for the software they use.

“Companies across the globe are having to decide how to take some of the ongoing costs out of their infrastructure without it impacting upon their business,” he says.

“In order to get the most out of IT,” adds Martha Bennett, research director, financial services technology, Datamonitor, “not only is there a move required for a much more flexible, adaptable, modular type of IT deployment, whether that's SaaS or all in-house, but also it's much more around business and IT working together to optimise the process as IT alone will sooner or later hit the buffers in trying to take the cost out of the business.”

Many businesses also tend to stumble with IT deployments when it comes to identifying what their end-to-end processes really are and how much they actually cost them.

Assuming they have this, says Bennett, the next difficult bit is changing process as companies run into all the associated cultural and people issues. Of course, certain types of automation require a considerable investment and this means enterprises need to look twice between what they can and what they need to do.

“This is a direction in which some businesses have started to go and many will have to go because there are, believe it or not, companies out there that have no further room to cut IT costs,” she adds. “They've done what they can to consolidate servers, done tings on the infrastructure, streamlined their connectivity and there's nothing left to cut.”

“Automation is key,” adds Sascha Ohler, senior product manager for Financial Services Solutions at Perceptive Software. “One of the main objectives has to be to replace variable expenses with fixed costs.”

He believes solutions allowing businesses to automate processes in a way that avoids the rehiring of staff cut during the downturn should be seriously looked at.

That said, SaaS (Software as a Service)and outsourcing look like being the real winners right now though as businesses warm to the idea of managed services and being charged for software on a utility basis.

Such deals, often charged on a 'price per user' basis negate the need for large, up-front capital outlay and that of approaching the market to raise new capital.

“Indeed, in some cases, service providers will also offer the option of 'buying-back' a company's existing assets as part of the outsource deal, providing an additional boost to operational cash flow,” explains Kris Hardiman, head of managed services at Siemens. In addition, he says many new outsource and managed service contracts are being provisioned on a risk share basis, with defined conditions that if the assumed cost reduction and productivity targets are not achieved, then the service provider is under obligation to offer pre-established compensation to the customer.

It's important to stress however, that such risk share agreements are often a two-way street.

“Conditions are in place for reimbursements if the provider under performs against commitment, but also conditions for enhanced rates exist if an over performance is delivered,” adds Hardiman.

If anything the current climate does provide a real excuse for enterprises to take a long, hard look of at existing operations and the associated technologies, as all too often, these have been growing in expensive and underperforming data silos for years.

More than ever, says Martin, businesses must fight only the battles they need to win, deploying strategic applications to address specific business needs.

“It simply doesn't make financial sense for a business to stump up millions of pounds up front, especially during a time of economic uncertainty,” he adds. “Technology now has to prove itself and earn its keep.”

About Us