By: Dennis Monner

The economy continues to teeter on the brink of a recession with some experts believing we’ve already reached that point depending upon the geo. While gross domestic product has dropped the past two quarters—the traditional marker of a recession—a strong labor market and corporate earnings growth has delayed the label (figure 1 below).

Recessions impact all corners of a business—and the information technology department is not exempt. Even the threat of a recession alone can dramatically impact how a company operates. Technology investments are likely to slow, or at the very least, stay flat. Business leaders take a more cautious approach to technology spending with a focus on an immediate return on investment as opposed to experimental solutions.

Maintaining IT, network, and security operations while limiting budget is challenging. Still, by making a proactive, concerted effort to break old habits and move away from long-term commitments with limited flexibility, chief information officers (CIOs) can ensure their organizations’ IT strategies will thrive in any economic climate.

Figure 1 click to enlarge

Free your capital

The pandemic reinforced the inherent importance of enterprise flexibility. The ability to pivot on a dime, free workforces to collaborate remotely, and make stuff work in a world hamstrung by a once-in-a-lifetime event separated the thrivers and survivors from the strugglers. The difference in many cases was refocusing on operational expenditure (OpEx) instead of capital expenditure (CapEx) to double down on the flexibility that comes with an informed approach to IT spending that matched the agility of technologies themselves.

Long-term, fixed-cost capital expenditures are the ropes binding the inflexible enterprise. It’s the ‘how we always did it’ syndrome, locking users into long-term commitments and inflexible enterprise dynamics.   

While IT organizations have become comfortable migrating workloads to ‘pay per play’ cloud models, much of the network and security connecting those workloads still sits on the books as capital expenditures. In response, many CFOs are shifting IT investments from capital expenditures to operational expenditures, based on the reasoning that OpEx is intended for fluctuating costs—for example, rapidly changing technology. Unfortunately, there is nothing static or permanent about the threat landscape or the dynamics of how users interact with their workloads.

Reallocate existing funds

Recessions create a new financial reality for many businesses, but one that can also stimulate positive change. The Covid-19 pandemic forced many companies to pivot quickly, reallocating spending on remote technologies, communication platforms, and network security to keep their staff fully operational. In fact, businesses spent more than $15 billion extra per week during the pandemic to support hybrid work, according to KPMG. 

Once faced with keeping operations running at almost any cost, CIOs must now revert to a more well-known mission: do more with less. For many technology leaders, that challenge presents true opportunity. As this Wired article from 2009 highlights, the Great Recession spurred large-scale investment in cloud computing.