Investing in I.T During a downtime = strategic advantage December 18, 2007Posted by Darth Sidious in Business Management.
Many industries are cyclical, and when the market goes down there’s nothing you can do about that. So to maintain your profit levels you do the most logical thing – cut costs by eliminating duplication, unnecessary bloat, unproductive departments, kill losing product lines, etc… And a very popular victim is I.T (I.T infrastructure, software development, etc…).
No doubt about it, I.T is a costly overhead – and usually categorized as a cost center and thus viewed as a necessary evil. But consider this scenario:
During a down market, you cut back on your I.T costs and save some money in the short term. Your existing I.T investment has staying power, but overtime your I.T capability will begin to languish (technology will become obsolete, servers will start dying, etc…).
Eventually the market picks up, and you begin to invest in I.T again. However the return isn’t immediate, it takes time to put together the project plans, the projects themselves take months to years to complete, you have logistical challenges of trying to get things that are obsolete back to par again, etc…
During a down market, they continue to invest in their I.T. It helps them maintain their profitability, efficiency (e.g. automating as much as possible so that they can function on fewer staff, etc…). But here’s the best part – because their I.T is ready to go, as soon as the market picks up – from a technological capability perspective they’re poised to leverage the up market to the max.
The issue is Lag Time. Company B who now has a lag time of trying to catch up to Company A – they may eventually catch up, but they’ll need to invest even more into I.T in order to do it. And the worst part is, even though the market is up, from a technology capability perspective they’re way behind the game and unable to fully capitalize on the up market.
So from a business strategy perspective, there’s an opportunity to get way ahead of your competition if you know they’re the type to be a Company B. If your competition comprises of Company A’s, you better follow that approach if you want to survive, otherwise you let them get potentially years ahead of you technologically.