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Recession revisited: Will this time be different for IT?

Recession revisited: Will this time be different for IT?

As the US economy turns downward, CIOs are preparing in dramatically different ways than the last time

Leveraging resources

Another significant difference between the current economic environment and the last downturn is that it's not just CIOs like Sacchi who have better tools to work with.

CEOs, CFOs and other business executives are all making much more extensive use of business intelligence systems and dashboards to track key performance indicators such as sales and inventory turns. As a result, business and IT organizations are reacting much faster to even subtle changes in business conditions.

"We tune very quickly now" to changing market conditions, says Chris Eberly, head of enterprise information management at ING Group, a global financial services company.

Because ING's wealth management business in the US has not yet been affected by the sputtering economy, its IT spending plans have also remained unchanged, says Eberly. But if ING's business does get squeezed down the road, its IT organization can react more quickly now than in previous economic cycles because of its increased reliance on domestic and offshore contract labor.

In the early part of the decade, ING's IT organization was predominantly made up of full-time employees, says Eberly. But over the past five to eight years, ING has increased its reliance on contractors, allowing it to scale its IT labor pool up and down based on project demands and changes in business conditions, he says.

While US IT executives in general are certainly leveraging global sourcing models more intensively than they had in prior economic slumps, they're also not pulling back the reins on domestic hiring. At least not yet.

"I'm not hearing the term 'hiring freeze' too much yet, but it's in the wind," says John Bemis, a partner at recruiting firm Benchmark IT. Most of the company's financial services, pharmaceutical, retail, hospitality and manufacturing customers are moving forward with their IT hiring plans, says Bemis. But the mood among his CIO clients is considerably more cautious than it was in 2007, he adds.

The IT labor market is noticeably different than it was after the stock market tanked in mid-2000, says David Foote, chief research officer at Foote Partners, an IT skills research company.

Back then, "you had this bloat of Y2k workers, and 10 per cent to 15 per cent of the IT workers just left the IT field altogether after that," he says.

But since then, an increasing percentage of discretionary IT spending has been directed toward new application development as opposed to IT infrastructure and operational types of investments, "and I don't see [employers] reducing that hiring," says Foote.

That's certainly the case at Wells Real Estate Funds. The national real estate investment firm has a 37-person IT staff with four positions open. Oracle, document management and help desk skills are among those it's seeking, says Barry Cohen, the company's vice president of applications management.

The company has not been adversely affected by weaknesses in other portions of the real estate industry and has increased its IT budget by 5 per cent to 10 per cent this year, says Cohen.

IT hiring has also continued apace at some companies that have tightened their IT budgets in other areas. For instance, even though CompuCredit has cut its 2008 IT budget by 20 per cent compared with 2007, Sacchi says he recently hired two virtualization specialists and an outsourcing relationship manager.

In the event of an extended recession, the fate of many IT groups will depend on their reputations, says WesCorp's Barber. CIOs whose IT organizations have been able to deliver on meeting business requirements and who have forged strong relationships with their business counterparts should be able to convince senior management that a stable IT organization is in the best interests of the company, he says.

"Our relationship with the business units is what gives us that credibility," says Barber, who is currently trying to fill eight open positions for people with .Net, Java and IT security skills.

And people aren't the only resource being leveraged like never before. The consistent budget pressures that IT executives faced during the earlier part of the decade have taught them how to better stretch their other resources as well.

For instance, companies are now much more likely to reuse software components for projects in other departments or across continents. For its part, ING took a reference architecture (a set of IT architecture best practices) that was developed in the US and began extending it to Asia, Europe and parts of South America in 2003, says Eberly.

"One of the things we look at is how we can leverage work that's already been done," he says.

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