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CIOs Should have a Plan in Place now to Tackle a Second Economic Downturn
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In 2008, most CIOs were forgiven for being unprepared to deal with the global recession, but if another recession unfolds in the next 12 to 18 months, no CIO will be forgiven for being unprepared a second time, according to Gartner, Inc.
In May 2010, investor doubts about the health of the global economy returned to the world's capital markets with a vengeance. The possibility of nations defaulting on repaying massive loans, high unemployment rates, depressed housing prices, limited access to consumer and business credit, a growing belief that a sustained economic recovery may not be possible this year, and an array of other factors have all combined to shake investor confidence to its core.
As these and other factors were unfolding, many economists were still maintaining that 2010 and beyond would be a period of modest recovery and growth. Because so much uncertainty exists about the sustainability of the current recovery, CIOs should confront such uncertainty with clear and decisive action. They should augment current near-term plans by preparing for a second recession.
Gartner recommends that CIOs take the following key actions to ensure that their enterprises are best placed to weather any potential financial storms over the next 12 to 18 months:
Enlist C-Level Action Now -- As IT leaders learned from the recent recession, executives will once again have to make a multitude of decisions to minimize the effects of a second business downturn. Because most official national recession declarations are announced well after the actual start of a recession, IT leaders should suggest that their enterprise executives convene now, so that business downturn response guidelines may be established before capital markets, customers, suppliers, creditors, etc. panic in the wake of bad economic news.
Focus on the Current Fiscal Year -- To save money as quickly as possible in the event of another business downturn, CIOs should work with executives to determine which IT projects scheduled and approved under the current IT budget may be postponed and which may be entirely canceled. Likewise, once all projects for the next fiscal year are identified, CIOs should determine which of those projects may be postponed and which may be entirely canceled.
Focus on the Next Fiscal Year --Once all projects for 2011 are identified, simultaneously determine which of those 2011 projects are relatively expendable and, therefore, may be postponed and which may be canceled, should deteriorating business conditions warrant such steps. Of course, the decision process for determining which projects may be postponed or canceled must include an assessment of the contractual exposures that may exist or arise with IT vendors for hardware, software and services.
Use Zero-Based Budgeting for Projects -- As CIOs begin preparing for their 2011 budgets, they should adopt zero-based budgeting for projects in 2011. 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
The annual recurring costs required to maintain those projects once they are completed
Use Zero-Based Budgeting for Existing Applications -- CIOs should compile an inventory of existing applications that are maintained by the IT staff and assign a reasonable estimate of the annual cost incurred to maintain each application. Once calculated, Gartner recommends having the business unit executives sign a document affirming their understanding of the estimated annual cost for overseeing and maintaining their applications.
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[Full Article]
Jul-11-2010 |
Gartner Trims Worldwide IT Spending Growth Forecast to 3.9 Percent for 2010
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Worldwide IT spending is forecast to total $3.350 trillion in 2010, an increase of 3.9 percent from 2009 spending of $3.225 trillion, according to the latest outlook by Gartner, Inc. Gartner has lowered its outlook for the IT industry from the first quarter of this year when it forecast worldwide IT spending to grow 5.3 percent, primarily due to the devaluation of the euro versus the U.S. dollar since the beginning of the year.
Worldwide computing hardware spending is forecast to reach $365 billion in 2010, up 9.1 percent from 2009 spending. In software, IT services and telecommunications, the appreciation in the value of the U.S. dollar, especially against the euro, has acted to dampen U.S.-dollar-denominated growth in 2010.
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[Full Article]
Jul-11-2010 |
Wall Street Firms Set to Increase IT Spend Through 2011 on Transformation Initiatives
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A new survey of nearly 250 business and IT Wall Street professionals reveals that almost one-half expect 20-30% of their technology budget to be allocated for transformational initiatives in 2010 and 2011. The Wall Street professionals polled in the survey shared the view that the most likely increases in IT investments for analytics are expected to be risk, compliance and trading.
The research from Securities Industry and Financial Markets Association (SIFMA) and IBM has found a greater focus on the development of systemic risk strategies. Of all regulatory activities, systemic risk was chosen by 55% of respondents to be the largest driver of IT investments. Building on that trend, risk analytics for compliance was ranked as the top analytics investment opportunity (37 percent) beating out categories such as analytics for client segmentation (21 percent) and external fraud (13 percent). Over 90 percent of survey respondents expect to increase their investment in analytics over the course of the next year.
While economic uncertainty still remains high, the new survey shows that concerns about the economy are waning from 2009. For the first time since the 2008 financial collapse, firms are revisiting the use of IT to promote organizational sustainability. Key priorities include innovating processes around trading, portfolio management and risk management. Surprisingly, client relationship management ranked last out of 17 categories with only 2 percent of participants selecting that option.
Despite the positive technology investment outlook, Wall Street professionals cite lack of IT staff and high implementation costs as the biggest inhibitors for technology implementation - which remains consistent with findings obtained in 2009. To overcome some of these challenges, the industry is showing a larger appetite for disruptive technologies such as cloud computing (61 percent) to force business model change.
Other key findings from the survey include:
90 percent of participants expect to outsource one or more of their processes
Firms are most likely to outsource compliance reporting and analytics for risk
Behind cloud computing, mobile technologies are expected to force significant business and operating model changes
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[Full Article]
Jul-04-2010 |
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