Should you delay or cut IT projects in a recession?

Jul 19, 2022


As the world prepares for a tough economic downturn, should business and IT leaders be considering delaying or cutting spending on technology initiatives?

There’s no ‘one size fits all’ answer

There is probably no right answer for every situation. Depending on the nature of the specific IT project, putting it off might avoid costs in the short term – but it could also backfire for the business longer term. Timing is everything, particularly when it comes to technology changes that can give you a competitive advantage, such as improving the customer experience. If you are already in catch-up mode, any delay could leave you further behind.

It’s all about the business case. In the current climate it’s important to review your cost and revenue forecasts for each project and check they are still accurate. If the numbers stack up and you are confident of a return on your investment you should go ahead. Evaluate each initiative on its own merits rather than freezing all new IT investments.

Don’t sacrifice inward-facing investments

One obvious ‘middle way’ is to push ahead with customer-facing projects around engagement and ecommerce (that have the potential to attract new customers or retain existing ones) and rein in spending on inward-facing investments that improve employee experience – on the basis that they will have a less direct effect on your revenue.

The risk in this though, is that some of those inward investments may have the potential to deliver productivity and cost savings that you could miss out on. And, of course, there is the hidden cost of employees leaving in search of a better employee experience. This has been a particular problem since the pandemic, when we experienced the Great Resignation due to greater worker mobility, and employees re-evaluating what’s important to them.

Then there is spending on IT projects that are critical to any business, such as security and business continuity, that you simply can’t afford to cut. A recent survey of CIOs reveals that spending on security software is the area they are least likely to cut if the economy worsens, for example.

Prioritize projects that deliver competitive advantage

If you stall on innovation, you risk missing out on opportunities: perhaps the opportunity to be among the leaders in your market rather than a follower. It’s important not to miss a key customer trend and fall behind your competitors.

For example, we know from research we recently conducted with customers of household energy and water companies in the UK that there is a real thirst for self-service technology. 72 per cent of customers want online resources so they can resolve their queries themselves. And 60 per cent would prefer not to call customer services at all if they can solve issues themselves online. So, if your digital channels aren’t ready for that, you could start losing customers.

Make your technology investments future proof

At the end of the day, you should always approach any new technology investment with caution. Don’t believe the hype. Make sure you trial the technology yourself and speak to other customers before going ahead.

Importantly, review the results of your technology trials in light of the changing economic circumstances. Are your revenue and cost projections still accurate? Is competition for customers likely to intensify? Are your suppliers strong enough financially to weather the storm?

Be clear that any new technology you are implementing can handle your projected volumes – including online transactions or workload at peak times, and the growth you anticipate once the economy picks up again.

Economic uncertainty looks likely to be around for a while, so don’t let it hold you back from investing in your business. Instead, build in contingencies to deal with the unexpected, and choose flexible technology that will help you adapt quickly to whatever new challenges come your way.

Category: IT projects
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