The spillover of the current financial crisis into the main economy is fast raising the specter of a global recession. A natural reaction is for companies to batten down their hatches in anticipation of the coming storm. But natural reactions are not always the ideal ones. Companies that cut investments and headcount in previous recessions have found to their cost that they could not respond to the upturn when better times came.
It is the brave and the leaders who take advantage of temporary downturns to invest, retool and regroup. It is the Warren Buffets, who start buying when the market is down, that will emerge stronger.
In October, research firm Gartner revised its 2009 global IT spending growth forecast from 5.8 percent to 2.3 percent but also maintained that, despite reduced growth, recession in IT spending is unlikely. The research firm noted that the industry has remained fundamentally strong, with replacement cycles in emerging regions and technology shifts, such as renewed interest in cloud computing, helping to sustain the industry through the tough times.
One could argue that delaying IT and networking investment until an upturn is the most logical move in this age of uncertainty, but enterprises could — and should — see this period as an opportunity to pursue IT expansion. Organizations should be searching for higher value solutions to help them drive efficiency now while they prepare for better days. Now is the time to leverage the availability of more cost-effective equipment and support.
If anything, the current financial crisis is helping to usher in the next cycle of networking that research firm IDC calls “flight to value,” a phase when customers re- evaluate their IT and working investments based on a number of factors, including technological pervasiveness, flexibility, sustainability and pricing.
Linking the value chain
Such re-evaluation will inevitably take us back to fundamentals, and that is to the basic IT infrastructure, or what could be termed as ‘infostructure.’ That infostructure is the corporate network that today has become the central nervous system for enterprises. However, much has changed in this past decade. The corporate network today links not just its software and hardware, but also its ‘heartware’ — employees, customers, partners, distributors and other stakeholders. By linking the creators of value, the network becomes the company’s own value chain. Indeed, it would not be an exaggeration if we were to say that ‘the network is the company’.
Network value creation
Viewing the corporate network as the company’s central nervous system can create a paradigm shift from the network as a cost center to the network as a mission- critical creator of value. Organizations are discovering the economic advantages of converging their various communications systems into a single network infrastructure. They are deploying IP telephony and increasingly, video over IP on their networks, thus saving on the costs of maintaining two separate network infrastructures. Others are deploying video over IP as a backbone for their security surveillance systems. ‘One network, many services’ has become the new clarion call.
Beyond cost savings
Perilous times such as these invite critical re- examinations of investment portfolios. IT investments will not be excluded. As mentioned earlier, such re-evaluations must include IT not as a cost center but as a creator of business value. It’s not just about cost savings. The ‘flight to value’ should not be confined to acquiring lower-cost alternatives. Rather, this is a good opportunity to look at how much each investment dollar can be stretched. Companies can translate the lower costs they enjoy on a network upgrade into a bigger redundant network. By acquiring additional network switches on the same budget, they can create a redundant network and ensure uninterrupted operations for their business activities.
Another important aspect of IT investments is long-term investment protection, which often relates to the issue of open systems and standards. Most network solutions today are open, but it can be argued that some are more open than others. A network infrastructure that creates interoperability problems with other vendors’ equipment, or one that locks you in with one vendor, cannot be considered open. It is also an investment that may not be fully protected. A truly open network architecture must enable and support other third-party solutions, as well as the development of open-system plug-ins. Investment protection must also include future-proofing your network infrastructure to support new and emerging services. Again, the full support of industry standards, as well as the vendor’s active involvement in the development of those standards, will be critical in protecting your network investments for the long term. These are hard but interesting times for many companies, but for discerning managers this is an excellent opportunity to create new value from your network investments.
Mahmoud El Ali is general manager,
Middle East and North Africa for 3Com