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IT Investing in 2010

Nov 05, 2009
Wayne Wanless
As I am writing this, we are well into the fourth quarter of 2009, so this is a recap, and my futile attempt at a prediction, of what we will see from an Information Technology (IT) investment perspective for the remainder of 2009, and the first three quarters of 2010.
Since the financial meltdown (Q3 2008) up to the latter half of the second quarter of 2009, we saw a trend towards short-term payback IT investment. Most (upwards of 90% in my experience) investment was centered on productivity enhancing and/or cost reduction IT expenditures in an effort to cut (or control) costs, and meet quarterly profitability targets. While this type of IT investment will [should] always be part of the equation, it typically does not comprise as large a share as it has for the past year.

Currently, the US economic recovery is in its infancy (at the time of this writing, the US has experienced its first quarterly growth since the financial crisis began), we are seeing an increased confidence in our business partners, and an uptick in inquiries surrounding IT investment. During the third quarter of 2009, we began to receive inquiries regarding �strategic IT� investments.

The inquiries typically fell/fall into one of three categories:
� Creation of (or expansion of) a Distribution channel
� Integration and/or evaluation of two separate entities (i.e. company acquisitions)
� Content delivery/messaging through an existing web property

These three investment points are indicative of an interest to expand market share and capabilities while diversifying risks�this demonstrates a return to at least mild optimism.

As the recovery progresses, I believe it will not be a steady uphill climb (�V� shaped recovery), but more of a �U� shaped recovery. This will cause some to doubt the strategic investments that have been initiated, and pull the plug before they come to fruition leaving an open opportunity for competitors to capture market share, and steal a march on their competition.

However, caution is warranted, as this is thus far a �government funded� recovery and the private sector has not fully bought in, I am advising my clients to limit their strategic IT investment to areas where they can:
� Open a new distribution channel that increases and/or diversifies their current market base
� Acquire a competitor or synergistic company that will strengthen their current market position
� Strengthen their online presence/position

The latter part of 2009 and the first three quarters of 2010 we will experience a continued trend of short-term payback / cost reduction IT investment. I see strategic IT investing returning in 2010, but at cautious levels (at or below 30% of total IT investment). I feel the recovery, while certainly underway, will be a slow recovery, and we will see many companies that are unable to weather the storm thus presenting opportunities for those companies that are able to make smart strategic investments while acting consciously to limit their risk exposure.

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