Keshav Murugesh, President & COO, Syntel

It seems that you can't listen to a news broadcast or read a headline today without hearing about the economy. Layoffs are occurring in every industry, Wall Street has taken a beating, and prosperity seems like a fading memory.

Much debate took place throughout 2008 about whether we were on the edge of a recession or not and it is clear now that we are. Chances are your department soon will be affected, if it hasn't already. You'll be asked to make some tough decisions, whether it be laying off personnel or choosing which projects to shelve. If budgets aren't being cut, they're being reprioritized and restructured. According to a recent report by Forrester, about 46% of enterprise decision-makers have indicated they have reduced IT budgets as a result of current economic pressures.¹

However, IT is still a critical component to success in this economy and was largely responsible for the economic boom we were so used to. This turmoil is not a time to stop the progress that was made; IT executives need to regroup, collaborate with the business, and figure out how to get all of the projects executed, with less staff and smaller budgets.

Making Sound Decisions
To keep projects moving in these tougher times, it is critical that IT managers tie expenditures to improved business processes and competitive advantages that will benefit the organization long-term. When top management is putting pressure on the IT department to cut costs, executives often make quick cost-cutting decisions that may make sense short-term, i.e. cutting staff and canceling projects. However, the decisions should be founded on analysis of the project's ability to result in improved competitive positioning or strategic value to the IT operation now and once the downturn is over.

IT executives need to make intelligent decisions regarding which projects to keep and the best way to complete them. Savvy CIOs are asking themselves some tough, but necessary questions:

• Which projects are not aligned with corporate business goals?
  Those projects that can't be directly tied to long-term corporate goals should be the first to go.
   
• What's the total economic impact of each of your IT projects?
  You should know the project cost in terms of capital investment, the resources required to complete it, and training costs involved. In addition, you should take a look at what the return on the project is expected to be. If you can't prove that a project will provide a good ROI, than maybe it should be scrapped for now.
   
• Where can I leverage the strengths of my sourcing partners?
  Now is the time to really explore capabilities and uncover unknown strengths that can benefit your market position.
   
• What are the risks associated with each project?
  You should evaluate the risks associated in implementing each project and the risks if you don't. Will it give you a competitive advantage or streamline operations?
   
• What are the savings that could be achieved through outsourcing?
  If a project is deemed high priority, do you have the resources you need to implement it? New development needs to occur while having minimum impact on existing systems.
   
• Will bundling process outsourcing and technology outsourcing deliver bigger bang for the buck?
  Be sure to evaluate the competencies and value your sourcing partners can offer.
   
• Can I restructure contracts with my sourcing partners with “pay for performance” or innovation rewards?
  Often, this results in a win-win for both you and your sourcing partner.

While the experts don't agree on when we will see a recovery, those IT executives that make intelligent decisions during the downturn will see their organizations recover more quickly and may even find themselves with a competitive advantage. By concentrating on those projects that will provide the greatest ROI and by completing those projects cost-effectively, forward-thinking IT departments will find themselves better prepared to compete once the recovery is in full swing. Those that made hasty, rash decisions and cut too deeply will be struggling to catch up.

¹ "New Market Pressures Will Drive Next-Generation IT Services Outsourcing", Forrester, October 9, 2008.

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