Wednesday, April 24, 2024

How the Recession Effects IT Spending

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We’re in a recession. Our currency is struggling. Inflation is back. Companies are worried. So what should we tell our bankers – the ones who control the IT budgets?

The KISS principle – keep it simple, stupid – seems to always apply, but in the current environment it’s even more relevant. In a recent lunch with a senior (non-technology) executive, he challenged me with a simple challenge: “what’s in it for me?” “Simple,” I said, “I can help you save money and make money with technology.”

As soon as I said it, I wished I had only offered one or the other – not both. So as the conversation evolved, I changed the message a bit to “I can help you save money or make money.” Promising both outcomes is suicidal.

Then we discussed technology trends. “What about hardware?,” he asked. I told him that price/performance ratios are more favorable than ever and that new technologies like virtualization – which I had to explain a little – can extend hardware (and software) capabilities pretty easily and cost-effectively. Translation: hardware is cheaper – I can save money with hardware.

But when we discussed the prospects for thin clients and the potential cost savings with their deployment, he went wild. Seems that he’s always hated “fat clients” – though never called them such – and always suspected that way too much money has been spent on the care and feeding of PCs. It’s safe to say that at that point in the conversation I had his attention.

We discussed networking trends and how in the not too distant future corporate land lines may well disappear yielding to wireless communications of all kinds. “You mean I can kill all those land lines?” Yes, I said. And what did he hear: less money.

The discussion about data was more about how to make money with technology. I explained that up-selling and cross-selling were essentially data-driven business models that required some investments in things like master data management – but that after these investments the potential for revenue generation was substantial. He liked that – and asked what his company was doing to make up-selling and cross-selling possible.

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When I told him that he might be able to replace Microsoft Office with an open source alternative – to liberate his company from whopping annual enterprise software licensing fees – he got even more excited. He demanded the list of open source alternatives to the proprietary stuff he’s been buying for decades.

I was leery of even bringing up software-as-a-service (SaaS) but thought, what the hell, how many times do I get to talk to this guy about technology? I was worried that the he might have a coronary when I explained how he could rent software (and hardware) instead of going down a multi-year implementation/deployment/support cycle. The idea that he could rent just about everything got him thinking about whether or not he should even be in the technology business.

“So why I am spending hundreds of millions of dollars every year on technology,?” he asked. I answered him with a question (since we’re in a political season): “Is technology one of your core competencies – and, even if it is today, do you want it to be tomorrow?” This got him thinking. Maybe he should re-think his internal commitment to IT.

Re-thinking is the key here. As things get tighter and expectations about the business value of IT increase, arguments for technology spending need to simplify around some core messages. Save-money-or-make-money is the argument, nothing more, nothing less. If you can shift the discussion to one or the other or – in a perfect world – both outcomes, you will get the as much attention as you want. Then all you have to do is deliver.

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