With the economic impact of the coronavirus starting to become clearer and the IMF predicting the steepest recession in a century, it would be easy to watch it coming like a rabbit in the headlights, transfixed until it is too late. It would equally be easy to carry on regardless, leaving the financial decisions to the CFO.
My advice to people running technology teams is — don’t do that! Let’s look at what we can do today, given that unless you’re working in a very special business environment a global recession will mean your CFO will be coming to see you for savings at some point in the not-too-distant future.
Nobody likes to think that their hard-won and already-too-small budget is going to be cut. And downsizing as a command from above rarely works out well — it happens too fast, it doesn’t remove the demand for the services that are costing you money, and it’s a bit like a fad diet, the weight soon comes back and eventually you realise it’s your lifestyle you have to change. Done quickly and without thought, you will end up cutting headcount as the first and most obvious target and the work will merely be redistributed amongst the survivors. This leads to lower morale and poor productivity. Then, of course, you’ll hit some problem caused by the lack of people and hire a bunch of contractors to fill this “temporary” gap, funded by some magical budget from another part of the business.
So, let’s try to avoid this situation. And the best way to do that is to show that you have a plan before a plan is presented to you.
Costs exist for a reason — you can’t take away the cost without removing the reason. So, what are the things your business might do to reduce overheads, what market areas are you most exposed in, and where will the hard decisions most likely come first? We need to think about retaining flexibility and identifying where your business might make cuts that can be reflected in the IT spend.
Just a few examples:
• If your business reduces headcount by 10%, what does that do to your licencing models for key applications and productivity suites? Can you scale down or are you committed to volume?
• If your business closes an office location, what happens to the equipment there – can it be repurposed in future projects? Do you lease or buy, and what might you change in the short term?
• If you lose customers in a downturn, what does that do to your requirement for compute and capacity in the customer-facing systems? Are they scaleable?
• A reduction in service desk calls might be the result of a shrinking business – do you outsource this activity? Do you have the ability to reduce the cost of this based on utilisation?
The impact of the coronavirus on the UK tech sector: disruption ahead?
What will be the overall impact of the coronavirus on the UK tech sector? Will the sector shrink? Will innovation be hindered? Or will it fact, thrive? Read here
Speak to your colleagues, especially those in finance — they will know where the likely casualties will be in terms of business activities. They may be making assumptions about your team and your room for manoeuvre that you can correct before the concrete has dried. This is a tough, emotive time, as everyone will be scrapping to keep their own team as intact as possible, so working from a position of fact when the arguments begin will be imperative.
Of course, your business will have very specific circumstances, but the main thing is to realise that because this is coming down the path you must act now to understand what you are committing to for 2020 and beyond from service providers, outsourcers, consultants, equipment leasing, telecoms providers etcetera. They will all be very keen to tie you into multi-year deals with discounts right now. This might look attractive but when recession hits flexibility is vital. It is worth paying more to retain control. You must not allow your hands to be tied at this most critical of moments.
I’ve never been someone who dwells on the negatives for too long and I’m not going to start now. There are opportunities in recession, especially for the technology team. There is digital transformation work that becomes necessary rather than optional, there are business areas that grow whilst other shrink and there are alliances to be made with suppliers and customers fighting the same battles. You will have issues in your own processes, adding time and cost that you can use this opportunity to tackle. These creep into the best teams, so don’t be defensive, listen to your people and get your house in order. In a future blog post I will look at some of these reasons to be cheerful in more detail.
But today (really, TODAY), start thinking about the reality of recession.