A pair of Forrester Research analysts gave CIOs a passel of advice Thursday on how to deal with the possibility of a U.S. economic recession.
"We are not predicting a recession, but we think its important for CIOs to be proactive, to get their businesses ready in case there is a recession," said analyst Andrew Bartels, who conducted the teleconference with colleague Alex Cullen.
Their recommendations boiled down to a number of main themes: the right ways to cut costs, to work closely with CFOs and to plan not only for the lean times, but the good ones that inevitably follow.
"Get close to your CFO. You want to be arm in arm with that CFO," Bartels stressed.
Forrester said there is a 55 percent probability the economy will remain essentially stabilized, due to factors including U.S. exports boosted by a weak dollar. The firm projects a 35 percent chance the country will enter a shallow recession, and a 10 percent chance it will fall into a deep one.
The analysts said to watch for two key warning signs: Gas prices rising above US$4 a gallon and two or more consecutive months of non-farm payroll employment.
If they haven't already, CIOs should prepare now by reviewing their portfolios and identify which projects could be postponed, cut or cancelled, he said.
"If you're running things well, adapting to recession is easier," Cullen noted.
The tradeoffs vary depending on the type of cut, he said. For example, delaying hardware purchases could result in increased service outages.
CIOs could also try other tactics, such as renegotiating vendor pacts or enacting hiring freezes, according to Forrester. Such measures could antagonize business partners and overburden staff, they said.
But those types of risks are mild in comparison to that posed by cutting certain types of "low-hanging fruit," such as time and support for research and development.
"These things look like they don't have immediate payback, so the question is 'Why are we doing them when times are tight?'" Cullen said.
Likewise, it would be foolish to pull money and resources away from architectural strategy, he argued: "You're going to be impeding your ability to take a long term view of IT investments. When the tap opens up again people are going to be creating silos ... and you're going to spend your time unwinding these things."
"The worst thing you can do as a CIO is get so focused on cuts that when you come out of a recession your department can't take the business where it wants to be," Bartels added.
Outsourcing IT may also look like an appealing option, but the analysts issued a stern warning against it as a quick fix.
Large-scale outsourcing deals take a long time to close, for one thing, Cullen argued: "This is not near-term savings. This is not 2008 savings." But outsourcing of a particular IT function could make sense, he said.
The hot trend of the past couple of years -- SAAS (software as a service) -- is not necessarily a fitting remedy during a recession, the analysts argued. While SAAS vendors relentlessly tout the cost savings their offerings can provide, it would cost a lot more to rip and replace legacy assets with SAAS products, the analysts said. However, they added, SAAS might offer lower upfront costs for a new technology.
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