Considering the current economic scenario & downturn, the first and foremost thing about the organization strategy which needs to be observed is, the primary impact of the downturn has resulted into a credit crunch situation. This essentially means that the cost of capital for an organization has gone higher and it also means that the cash flow situation in organizations would have tightened; the available money would be diverted towards the core business & working capital. Now if we translate the same on how this would affect IT. Most of the IT projects are implemented with the view of saving costs over a period of time. Like any other investment the IT projects also require an immediate investment resulting in future returns (cost savings) over a period of time. So the people responsible need to judge the IT budgets and the individual projects as the investments-
1- The IT projects acting as the support system to the current system and cannot be taken down needs to be treated as expense. A cheaper maintenance alternative or renegotiation of the contract can be the strategy.
2- The project which are from a view of transformation/cost savings n future need to be treated as investments and since the cost of capital has risen, The ROI, NPV & IRR of the projects need to be recalculated and considered. The project which does not offer an NPV/IRR acceptable to the company needs to be reconsidered not only within the company but also with the IT partner.
3- Also the projects which have a shorter breakeven point should be given preference over the long term transformational projects. They will produce quicker returns and enhance working capital in a short term. Another thing which becomes critical in IT parlance in these times of downturns is when an IT project is taken the quality and the ability of the team should be scrutinized with extended care by the organization. The investment in IT may be successful or failure, run into huge cost over-runs or be completed before time and at lower cost and also deviating from business requirements or completely in sync with business requirements. All this depends upon the team of the IT partner and is a very critical factor in the IT projects. This is one area where organizations should be really monitoring.
I believe that if worked on diligently even IT projects would give more than expected returns irrespective of the downturn just like any good investment if they are based on strong fundamentals.
by Prats | on Tuesday, April 14th, 2009 at 8:37 am | 
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