IT Innovation Will Be Key to Turn Economic Crisis Into Opportunity

Gartner RAS Core Research Note G00162229, John Rizzuto, Betsy Burton, 10 October 2008

Not all companies will be equally affected by the financial crisis. Continued IT investment is imperative for all enterprises, regardless of whether the objective is to maintain or to gain competitiveness. The inevitable recovery will provide just as much opportunity as the crisis reveals risk.

FINDINGS

The United States' most valuable asset is its people's ability to innovate. Innovation is crucial as we transition from short-term crisis management to recovery. IT is the cornerstone of wealth creation in modern economies: Enterprises and government agencies must accelerate IT investment to remain competitive and return to prosperity. During the intermediate to long term, IT will become less discretionary, and IT budgets will take a greater share of overall enterprise spending.

ANALYSIS

Although the advantage in manufacturing has shifted to lower-cost producers overseas, the U.S. remains dominant in industries that are driven by intellectual capital, such as medical technology, pharmaceuticals and information technology. The transition from tangible products to design- and research-intensive industries requires continued leverage of U.S. intellectual property for wealth creation. Research and design are data-intensive. IT is not only critical in tracking, analyzing and storing data; IT is also imperative in transforming data into useful information.

Once information is created, it is critical that the information be made accessible. Gartner believes that the regulations that arose from the Sarbanes-Oxley legislation will pale next to the coming regulations stemming from the current financial crisis. The impact will extend to all enterprises, as credit agencies and regulators require more transparency. The requirements for increased transparency will accelerate the demand for real-time systems, the integration of data, and the accessibility of information. During the short term, many of these requirements can be addressed tactically, but during the longer term, there will be a need to accelerate modernization plans for the IT infrastructure.

WHAT YOU NEED TO KNOW

* Focus on refining your business and IT strategies, as well as enterprise architecture. These efforts will not only be beneficial in satisfying new regulations but also provide the opportunity to more efficiently and effectively manage your business and increase your competitive advantage.
* Encourage and support your people. Increasingly, people working together and supported by technologies will be the engines of innovation. To foster innovation, leaders must anticipate concern among their people, suppliers, partners and buyers.
* Understand that long-term technology investments will be more important than ever. The shock to the financial system will linger for several years, and as the recovery takes hold, many companies will use the crisis as an opportunity. Stronger companies will be able to acquire cheap assets and will strive to gain market share at the expense of weaker competitors, while other companies will simply have to focus on maintaining their competitiveness.
* Don't ignore the longer-term needs that will be crucial to keep your business efficient and competitive. While focusing on the stresses that the current macroeconomic conditions are putting on businesses, plan for the acceleration of the modernization of IT infrastructures and evolve an information-centric foundation.
* Continue to emphasize intermediate- and long-term planning to stay in the competitive forefront as the current crisis abates. Delaying or ignoring long-term planning at the cost of short-term pressure will lead to being at a disadvantage, placing companies in the unenviable position of having to play catch-up.
* Finally, when evaluating cost cutting, target areas in which a reduction in functionality now can eliminate legacy constraints. Thus, you can prepare systems for growth as the economy recovers.