Economic slowdown to test net execs' mettle

As the U.S. economy slams on the brakes, corporate network and IT executives need to rev up a different set of management skills to handle their staffs, budgets and development efforts in what could be leaner months ahead, experts say.

For the past year, most network and IT managers have focused on recruiting technical talent and rolling out new e-commerce applications. But with the threat of a widespread slowdown looming large, network professionals may need to enforce hiring freezes, slash discretionary spending and quantify returns on their IT investments.

Indeed, the economic downturn brings new career challenges - as well as opportunities - for network and IT executives, many of whom weren't in leadership roles 10 years ago when the U.S. suffered its last recession.

"IT managers need to understand what the impact of the slowdown is on their business and their industry," says Lyn McDermid, senior vice president of IT and chief information officer at Dominion, a Richmond, Va., energy company. "They need to relate that back to the services they provide . . . And they need to react quickly."

The current economic situation will require IT management to be more focused on the bottom line, says Gary King, senior vice president at State Street Bank, a Boston financial services firm."Everyone benefits from a rising tide," King says, referring to the recent boom times. "[In a strong economy] it's easier to move ahead on new projects and not stay as focused on price/performance and opportunity costs."

Recent weeks have featured a steady drumbeat of bad economic news:

More than 200 dot-com companies closed shop last year, with 60% of the failures occurring in the fourth quarter, Webmergers.com reports.
Industrial heavyweights such as Gillette, Whirlpool, Aetna and Ford announced layoffs, while veteran retailers Montgomery Ward and Bradlees are going out of business following weak holiday sales.
The stock market has displayed incredible volatility, with shares of technology bellwethers such as Microsoft, Intel and Cisco plummeting one day and rebounding the next.

Last week all eyes were on Alan Greenspan as the Federal Reserve cut interest rates as a means of staving off a recession. Despite the central bank's efforts, most observers agree that the U.S. economy is entering a new era of corporate belt tightening.

For IT managers, this new era will likely bring closer scrutiny of planned upgrades and development projects as well as some deferred investments.

"We may postpone or eliminate some discretionary investments such as upgrading PCs," says Cinda Hallman, senior vice president of global systems and processes at DuPont in Wilmington, Del. "But we still have to spend money on the things that support the infrastructure of the company, like transaction processing and network architecture. And we are going to continue to spend money on developing e-business systems because we consider that the future."

Network and IT executives may have more leverage to cut deals with their suppliers in a slow-growth economy.

"The competitiveness of IT vendors [in this economy] may help us," McDermid says. "We see vendors coming in a little hungrier, a little more willing to work with us."

Another area where the downturn may help network and IT executives is in filling open positions, as former dot-commers enter the workforce.

"Some of these people want to work for a company with benefits. They want to think about their families. They might find that it's good for them to get experience in a company with a big infrastructure," Hallman says.

For other companies, layoffs may be unavoidable. In that case, managers should be circumspect about whom they let go, says Chris Gardner, a partner in PricewaterhouseCoopers IT strategy department.

"Now is the time to trim the staff down to your top players," Gardner says. "You have to figure out how to retain your top people while you release your poor performers and position yourself so that when things get better you really have a core set of folks who can hit the ground running."

Keeping good workers is easier during an economic slowdown because people will seek stability and won't be as likely to look for greener pastures. Still, managers must remember what keeps employees isn't necessarily the paycheck and bonuses - it's how they're treated by their bosses, says David Foote, managing partner and research director at Foote Partners.

"If you keep your cool, people will want to work for you," Foote says.

One area where managers need to keep their cool is budgeting. As the economy slows, network and IT professionals will need to justify expenses.

"We need to make sure that we're spending the money in the right places," McDermid says. "We're looking at specific projects and saying, 'What's the business case? What's the value-add?'"

A good place to make cuts is in IT infrastructure, says Tom Mangan, a partner at Arthur Andersen. "You need to look at areas inside that don't add value to the business," he says. "In today's environment, building your own data center doesn't make any sense."

Mangan also recommends evaluating telecommunications costs because savings could come from new approaches and negotiations.

IT managers seeking investment opportunities will need to quantify rates of return. Certain kinds of IT projects, including consolidation and standardization efforts, may fare well if they offer significant cost savings.

"You need to bring tangible, quantifiable opportunities to the company and make a case for them," State Street's King says. "Some opportunities may offer hard savings in terms of dollars, while others will offer soft savings in terms of simplifying your systems."

King says the best opportunities are ones that make "you more efficient so you can pass savings on to your customers."

Economic slowdown to test net execs' mettle

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