By Anne Ozzimo

As the economic slowdown intensifies, executives are looking for ways to cut costs and IT budgets are under the microscope. More than 60% of CIOs are cutting back on short-term technology spending and postponing long-term plans, according to a recent survey by the US-based CIO Executive Board. IT budgets in the US are predicted to grow by only 2.3% in 2009, instead of the 5.8% growth originally forecast.

The economic crisis provides an opportunity for organizations to create leaner, more efficient operations, because circumstances demand that companies transform themselves to survive tough times. Oracle took this approach during the last downturn, consolidating and simplifying its IT infrastructure, and standardizing business processes worldwide. As a result, Oracle created a stronger platform to support future acquisitions and organic growth, and doubled its operating margins in the process.

US-based energy company Exelon understands the importance of investing in IT during a downturn. Last year, it kicked off a project to deploy an integrated Oracle platform to eliminate fragmented and manual planning and reporting processes and better manage its investments in tackling climate change. Despite the volatility of natural gas prices and the credit crunch in the US, the company remains committed to the project due to its strategic importance. “We can’t afford to stop investing in initiatives, like our finance transformation program, that will help us navigate through volatile business cycles, make prudent investments in our operations, and return value to investors,” explains Exelon Senior Vice President and CIO Daniel Hill.

Take IT Costs Out of the Business

Rather than slashing IT programs across the board, CIOs should consider reducing complexity to take costs out of the business, and focusing on innovative IT projects that deliver a fast return on investment (ROI). The key is to lay out a multiyear IT roadmap with both goals in mind, then identify areas where you can make progress very quickly, maybe in six or nine months. Ed Abbo, senior vice president of applications development at Oracle, says many IT departments have cut costs by reducing the number of applications across the business. Oracle Application Integration Architecture, a common object framework that lets companies create processes unique to their business, is designed to attack the kind of IT complexity that is plaguing most customers today.

One company that is taking advantage of this framework is Rackable Systems, a US-based provider of customized storage and server systems. The company deployed Oracle E-Business Suite 11i to support its business operations but did not have an effective CRM tool for managing leads, opportunities, and sales forecasts. The company purchased Oracle CRM On Demand and used Oracle AIA Process Integration Packs (PIPs), to link the software to Oracle E-Business Suite in three months.

Rackable’s new CRM OnDemand solution automatically synchronizes account information and associates opportunities with related quotes in Oracle E-Business Suite. End users need only sign on to the CRM service, and are able to see customer and product data directly through the interface. Nucleus Research estimates that the company achieved a 330% ROI on the implementation in just 5.3 months.

Innovate with high-impact, high-ROI projects

During a recent interview with BusinessWeek, Amazon CEO Jeff Bezos said: “There is no bad time to innovate. You should be doing it when times are good and when times are tough, and you want to be doing it around things that your customers care about.”

Bezos wasn’t just talking about investing in big innovations; he was highlighting technologies that can drive small, innovative changes in processes designed to delight customers, reduce overheads, and drive revenues. In fact, CIO Executive Board research found that companies that excelled through the last downturn reserved at least 5% of their IT spending for innovation.

In September 2008, global management consultancy McKinsey & Co identified four areas where technology investments can make a substantial impact. The first was developing systems that provide insights into customer segments and improve pricing discipline without increasing prices. Second was rethinking supply chains and logistics to improve delivery scheduling and inventory management. Third was enhancing support processes such as call centers to improve customer satisfaction, and the last was sharpening awareness of risk exposure and improving decision-making and performance management processes.

According to Oracle’s Abbo, customers must reinvent their processes in response to market dynamics during the downturn. “For example, a manufacturer might want to rethink the way it designs, manufactures, and distributes products in response to slower demand, greater pricing pressures, or more volatile supply chains,” he says.

Ultimately, organizations need to invest in technology projects that reinvent their business processes if they are to survive and thrive in any conditions. By investing in technology initiatives that will help them navigate through these volatile times, they will position themselves for even greater success when better times return.

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