The challenge of IT in
Downturn
Dr. Péter Fehér
Corvinus University of Budapest
& ITSMf Hungary

Photo by Hilde Vanstraelen
„In an economic climateb
of slow and cautious
growth, IT is under
intense pressure to
manage costs and
ensure that spending
is well aligned with
business drivers”
Stevie Sacks,
Computer Associates
2004

Impact of the crisis 2008-2009
Source: Bryan, L. Hoffman, B. (2009) How managers should approach a fragile economy, in: McKinsey Quarterly, September, 2009

Stabilisation 2009?
Source: Bryan, L. Hoffman, B. (2009) How managers should approach a fragile economy, in: McKinsey Quarterly, September, 2009

Picture by Ruth Livingstone
Crisis reactions
Cost reduction
Debt management
Supplier management
Customer reliability
Reducing organisational complexity
Increased controlling and visibility
„…take the issues seriously, you
have not taken before. Do, what
you haven’t done, yet…”
György Bőgel, CEU

Cost cutting efforts

Value creation through IT
Business cost reduction Time-to-market ration, quality, efficiency
Business innovation
with IT

„Information technology is seen as vital to
business innovation, but the IT function is not”
IT is critical for business innovation
IT function is a driver for business
innovation Yes
No
IT function is the main initiator of
business innovation
0% 20% 40% 60% 80% 100%
Sevillia, O. – Nannetti, P. – Monnoyer, E. (2008) Global CIO Survey 2008 –
The Role of the IT Function in Business Innovation - Innovator vs Operator, Cap Gemini

IT has a significant role in
implementing business innovations
of 5
disagree;
20% strongly
agree; 35%
neither/both;
35% agree; 10% 3,6
IT has a significant role in
implementing business
Source: Survey results 2009 innovations

Our IT function is
the main initiator of innovation
strongly
agree; 5%
strongly of 5
disagree;
15% agree; 20%
disagree;
20%
neither/both;
40%
2,8
Our IT function is the main
Source: Survey results 2009 initiator of innovation

Cost reduction (2008 Q2)
Sorozat 1
100%
90%
80%
70%
60%
50%
40% Sorozat 1
30%
20%
10%
0%
Kategória 1 Kategória 2

Cost reduction
(share of organisations)
No
Yes
~80%
Source: Survey results 2009

Is your IT budget going up or down
in real terms comparing to last year? (2009)
40,00%
35,00%
30,00%
25,00%
20,00% ~20%
15,00%
10,00%
5,00%
0,00%
Down Down Down Static Up Up Up
(> 20%) (10-19%) (1-9%) (1-9%) (10-19%) (> 20%)
Source: Survey results 2009

Cut costs, but where?
Development;
45,00%
Operations;
55,00%
• Human resources • Business demand
• Suppliers specification
• Sourcing models • Conscious project
• Risk management management
• Operation costs • Project portfolio
management
• Processes • Business case analysis
• Open-source solutions

Cost cutting expectations 2008 Q2
Sourcing
models

Short term reactions 1
100,00%
80,00%
60,00%
40,00%
20,00%
0,00%
Stop new Project starts Postpone Renegotiate Stopp or limit Layoffs Stop Decreasing
hiring based on procurements supplier development consulting salaries and
business case contracts projects activities benefits
Already accomplished Planned Not expected
Source: Survey results 2009

Short term reactions 2
100,00%
90,00%
80,00%
70,00%
60,00%
50,00%
40,00%
30,00%
20,00%
10,00%
0,00%
Project starts Postpone Renegotiate Stop/limit Stop new Stop Layoffs Decreasing
based on procurements supplier development hiring consulting salaries and
business case contracts projects activities benefits
Already accomlished Planned
Source: Survey results 2009

Planned projects
80,00%
70,00%
60,00%
50,00%
40,00%
30,00%
20,00%
10,00%
0,00%
Operation Process Development Changing Developing Using open- IT risk
optimisation management of IT Service sourcing project soruce management
Management models management solutions
Source: Survey results 2009

Contraversial view of IT
"IT investments deliver more value to a company [...] -
by creating new efficiencies and increasing revenues -
than any savings gained from traditional cost cuttings."
Kaplan, J. - Roberts, R.P. - Sikes, J. (2008) Managing IT in a Downturn - Beyond cost cutting,
in: McKinsey Qualterly, Fall 2008, pp. 66-71.

Crisis management results
• Survive
• Lack of resources
• Rethink current practice
• Waiting for better times

Thank You!
Dr. Péter Fehér
pfeher@informatika.uni-corvinus.hu
Corvinus University of Budapest
Department of Information Systems
ITSMf Hungary