Insider Business Club: funding IT - tech crunch

Are IT projects suffering in the current economic crisis?

Andy Sharples, director of IBM’s global finance business

The credit crunch means that discretionary IT projects are under more pressure. Some are being deferred. But there’s a lot of interest in anything that is transformational and of strategic importance, and anything that drives significant efficiency and cost savings through consolidation or transforming processes.

Vendor finance has been under-utilised in recent years as a result of the tremendous amount of liquidity in the market. That has now changed completely. The availability and price of credit has changed. Whereas previously questions may have been ‘what’s the return on investment’ or ‘what are the cost savings’, today people are asking ‘what are the cash flow implications’ and ‘what is the drain on the company’s capital.’

We are also seeing a coming together of the IT and finance teams after a period of separation where finance decisions were made in one place and IT ones in another. Compared to the last downturn, IT is much more pervasive, e-commerce is a core operation for all companies and there is tremendous value locked up in IT assets.

If IT projects are of strategic importance or deliver cost savings, then go ahead. We know through history those companies that invest in a downturn and invest in the right way will emerge stronger in the end.

Can businesses get away with reducing IT budgets?

Dr Sharm Manwani, associate professor of information management, Henley Business School

If organisations are looking at reducing their IT budgets, they can’t stop thinking about innovation. They need to think about how they are going to change their processes, and what their people can do smarter. The financial crisis is a failure of information technology. Not the technology, but certainly the information, and the extent that the technology supported the information.

My question to FDs is, when they are looking ahead to business cases, to what extent are they doing risk-based scenarios? From the research that we have done, not many are. I’m not sure that we’ve taken those lessons on board, certainly not in the world of Wall Street and the stock exchange.

Outsouring is a legitimate thing to explore to cut costs. But before you go into any software-as-a-service, or outsourcing or offshoring deal, the first question you should be asking yourself, and it may be counter intuitive, is how do I switch it off, how expensive would it be to switch it off and can I switch it back to something else?

Organisations are starting to recognise that measuring return on investments is important, but you need to look at the total investment, not just the technology investment, but the people and process investments too.

Many businesses don’t have the competence to do it. They have relied too much in the past on external consultants to help them. My advice for FDs would be to look at that holistic view. Can you cost the different elements and be honest with yourself about what the real investment is?

What role can FDs take in IT investment decisions?

Paul Druckman, former president of ICAEW and chairman of business think tank, M Institute

The economic turmoil has tilted the balance and the FD is becoming much more involved in IT investment than this time last year. Good FDs think strategically about IT rather than just through efficiencies and that has been one of the failings historically.

There is a different style of IT project evolving. People are looking for the cash implications to be less onerous on the business, but that doesn’t mean that they are shelving projects. The projects that are likely to fail are where the organisation doesn’t understand the change that is going to happen. People are starting to understand that projects impinge right across the business and you can’t just bring in external consultants to do that work in the business.

We have got to be concerned about whether economic models are sustainable into the future. Therefore, when you look at the risks, they have to be at a much higher level than before and that business risk also needs to encompass the people and the longer term view of business in general and the economy as a whole.

The worry I have is that everybody just says ‘well, in 2010, things will be alright’. But will they? Will we be going back to where we were before with the same greed culture that we had?

In the 1980s, technology growth enabled us to get out of a recession. Now it is much bigger ­ technology is not going to enable us to get out of it. It will be one of the drivers though ­ it’s too big a picture.

Chaired by Rachel Fielding

Watch the events and sign up at www.insiderbusinessclub.com