Instability has taken a firm hold of the business landscape as the global financial crisis has brought about a legacy of uncertainty that is expected to persist, says Gartner SA MD Renee Jacobs.
Opening the Gartner ITxpo/Symposium Africa, in Cape Town today, Jacobs said the international ICT research firm views these increased levels of uncertainty as a deep-seated and far-reaching component of a newly defined business context.
Jacobs pointed out several indicators that illustrate the instability and uncertainty affecting businesses and how they are changing IT strategies.
These include the benchmark Standard & Poors 500 index hitting its worst levels since 1931, the worst performance by the British bellwether FTSE index, the massive contraction in world trade between August and November, and the deterioration of the rand-dollar exchange rate, with the local currency weakening from R7.85/$ in August 2008 to R11.95/$ in November, before recovering to current levels.
“A hostile environment emerged for corporate earnings, with company profits and dividends under pressure,” Jacobs said.
“I believe it is fair to say that the global crisis affected almost every business in SA, one way or another. Many of you have already participated in at least one wave of enterprise cost-cutting since 2008, placing considerable new demands on your budgets and planning processes.”
The overall theme for this year's Gartner ITxpo/Symposium is: “Planning for uncertainty, spending wisely and finding opportunities in uncertain times”. Four sub-themes are to be addressed over the next three days by the firm's analysts. These are: reducing and managing IT costs, improving business processes, delivering projects that enable business growth, and effective human capital management.
Jacobs says that, following Gartner's advice, many CIOs internationally are preparing two contingency plans - one to prepare for further cost reduction requirements and another to be ready to take advantage of an upturn, as soon as it happens.
Cost optimisation is not a one-size-fits-all activity, she added, and enterprises need to approach their cost optimisation programmes in different ways, depending on the style of the enterprise and the overall purposes for which it uses IT.
“Many CIOs are implementing budget reductions by renegotiating vendor contracts, delaying capital expenditures, and reducing workforce costs by shifting more work to in-house resources.”
Building bridges
Jacobs pointed out that business process management acts as a bridge between business and IT, and CIOs and their teams need to understand what their contribution to this effort should be.
Organisations should use the recession to force a shift in investment and resources and to move focus from old business models to those with much higher potential and competitive differentiation, she suggested.
“Negative economic cycles give us the opportunity to innovate, and we all need to recognise and act on this. Gartner's 2009 CIO survey also indicated that CIOs expected innovation to be the top business priority by 2012.”
Caught in crossfire
IT is caught between yesterday and tomorrow's thinking in terms of business, technology, management practices and people, she noted. “Innovation can be instigated, but this will only happen through a change in organisational culture. You need to identify and encourage the innovators in your business and create a culture where IT is seen as an enabler of business innovation rather than an obstacle.”
The theme of effective human capital management aims to prepare the enterprise to excel when the market improves. So human capital should be managed with the same strategic intent as is devoted to other resources, as this directly impacts sustainability and competitive advantage, Jacobs said.
CIOs and business leaders must strike a balance between controlling costs and being vigilant about finding and attracting qualified people who will facilitate growth, renewed investment and change.
“For many enterprises, the coming months will continue to be filled with uncertainties and challenges. Cost reduction initiatives bring about a level of unease within the workforce, which needs to be managed, so that it doesn't undermine the delivery capability needed to fulfil business needs. To survive, every organisation needs a productive, engaged workforce. This forms the fundamental basis upon which enduring organisations are built.”
The results from Gartner's IT Market Compensation Study reveal employees typically resign due to dissatisfaction with their managers, as opposed to their organisations. High-performance organisations are characterised not only by star performers, but also by effective leaders who understand how to improve performance by engaging with the workforce through excellent leadership, communication and recognition.
“Difficult times increase expectations of your leadership skills and social competencies to influence teams, inspire collaboration and build synergy across the organisation,” Jacobs concluded.
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