Staying the course technology decision making in turbulent times

Staying the course?
Technology decision-making
in turbulent times

Sponsored by

A report from the Economist Intelligence Unit


Staying the course?
Technology decision-making in turbulent times

Contents

1

Contents

1

About the research

2

Executive summary

3

Introduction: A technology stress test

5

Opportunity in adversity?

7

How technology decisions are being made

10

Technology choices

14

Conclusion: Investing for the future

17

Appendix: Survey results

18

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

About the research

S

taying the course? Technology decision-making in turbulent times is an Economist Intelligence Unit
white paper, sponsored by SAP BusinessObjects.
The Economist Intelligence Unit bears sole responsibility for the content of the report. The
Economist Intelligence Unit’s editorial team executed the survey, conducted the analysis and wrote
the report. The Þndings and views expressed here do not necessarily reßect the views of the sponsor.
Our research drew on two main initiatives:
! We conducted a wide-ranging online survey in February and March 2009. A total of 267 executives
took part from around the world.
! To supplement the survey results, we also conducted in-depth interviews with senior executives and
independent experts.
The author of this report was Kim Thomas and the editor was Denis McCauley.
Our sincere thanks go to the survey participants and interviewees for sharing their insights on
this topic.
May 2009

2

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Executive summary

I

n the business world, no aspect of company operations will emerge unscathed from the toughest
economic crisis in three generations. But information technology (IT), and the hard-won inßuence

that chief information ofÞcers (CIOs) and other leaders have gained for it, appears to be surviving the
crisis with conÞdence largely intact in many if not most companies.
The reputations of technology and the IT function did not fare well following the previous downturn
early in this decade. Since then, technology has become Þrmly embedded in company processes, and
chief executive ofÞcers (CEOs), chief Þnancial ofÞcers (CFOs) and boards have become convinced of
the importance of IT to their businesses. In the preceding crisis, overambitious technology investment
was blamed for many corporate ills; in this one, business leaders appear to view technology as an
important instrument in preparing their Þrms for recovery. Such executive-suite conÞdence means
that in many companies technology-led projects and IT budgets are enjoying greater protection than
other categories of spending.
Continued improvement in CIO-CFO relationships is evidence of Þrms’ expectation that technology
can help them to emerge stronger from the recession. Relations between CIOs and CFOs have often
been contentious, particularly when the budget knife is out. However, nearly one-half of executives in
an Economist Intelligence Unit survey conducted for this study maintain that co-ordination between
the two has improved at their Þrms in the past year. A majority of both CIOs and CFOs rate levels of
trust, communication and understanding between the two as strong. CFOs offer a rosier picture of the
relationship than do CIOs, but few in either group report a decline in the strength of their relationships.
Other key Þndings of the research include the following:

! CIOs are not losing their place at the table. Where they have gained a voice in major business and
technology decisions, CIOs’ positions are not being undermined as a result of the current economic
crisis. Very few survey respondents believe that the inßuence of CIOs in technology investment
decisions will decline in their Þrm over the coming year. A sizeable minority, meanwhile, expect the
CIO’s involvement in high-level business strategy discussions to expand.
! Opportunistic Þrms are receptive to renewed technology investment. A large minority (44%)
of the Þrms surveyed say that they will be “on the business offensive” in the coming year, looking for
3

© The Economist Intelligence Unit Limited 2009

Staying the course?
Technology decision-making in turbulent times

acquisitions or openings to take market share from weakened rivals. These Þrms are more likely than
those adopting a “defensive” stance to consider selective new investment in technology, with the
aim of improving their competitive positioning ahead of recovery. Technology investment proposals
will not enjoy an easy ride, however. More executives are becoming involved in investment decisions,
and the volume and detail of information required is increasing. Higher rates of return are being
demanded, and projects with shorter return periods are being favoured.
! Most Þrms are averse to suspending existing technology projects. There is a recognition among
corporate leaders that the implementation of major technology projects that they have launched is
important to their Þrms’ ability to survive the downturn. Less than one-quarter of survey respondents
believe that major existing IT-led initiatives should be suspended until business conditions improve.
Many believe that the crisis presents a good opportunity to drive through technology-led initiatives.
This does not mean that they will be embarking on entirely new initiatives, however. Few executives,
even at growth-oriented Þrms, believe that now is a good time to launch major new IT projects. CFOs
also show support for following through on existing investments, but it is unclear how often spending
requests in such areas will stand up to competing investment priorities in the business.
! The focus of investment continues to be on improving customer relationships. Customer service
will remain the priority area for IT investments during the coming year. This is for good reason,
as evidence mounts from several sectors that customer loyalty is eroding and customer churn is
increasing. Information management will also be prioritised, especially when it comes to projects
designed to improve Þrms’ understanding of customer behaviour.
Maintaining technology investment when times are very tough is not without risks for companies. But
some risk-taking is necessary if they wish to emerge from the downturn in a strong position to grow.
The management at opportunistic Þrms are betting that technology will help to deliver the competitive
edge they are seeking, and they are willing to keep investing to ensure this happens. CIOs and the IT
function will need to deliver.

Who took the survey?
The Economist Intelligence Unit’s survey, conducted in February and
March 2009, gathered the views of 267 executives on technology
decision-making in their businesses. The sample was senior: 45%
of all respondents were C-level executives, and over one-half of
4

these were CIOs or CFOs. It was also global, with 34% of respondents
based in Europe, 25% in the Asia-PaciÞc region and 24% in North
America. Over 20 different industries were represented in the
survey, although the majority of respondents (63%) came from
the technology, Þnancial services, and consumer goods and retail
sectors. More details of the survey sample and results can be found
in the appendix.
© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Introduction: A technology stress test

B

usinesses, along with the rest of society, are enduring the severest economic crisis since the
second world war. Isolated reports of positive business results in the spring of 2009 suggest that
the crisis may be easing, but the Economist Intelligence Unit considers a return to healthy growth
in most world markets to be a distant prospect. After contracting in 2009, the US and Japanese
economies, for example, will narrowly manage to return to positive growth in 2010, but economic
contraction will continue in the euro area. Business leaders hold correspondingly sober hopes: a

majority of executives surveyed for this report do not expect to see recovery in their markets before the
end of 2010.
Real GDP growth (%, at market exchange rates)
World
North America
Western Europe
Transition economies
Asia & Australasia
Latin America
Middle East & North Africa
Sub-Saharan Africa
Source: Economist Intelligence Unit, May 2009

IDC, Executive market
watch, March 2009. The
forecasts are in constant
currency terms.
1

5

2008
1.9
1.1
0.7
4.7
3.0
3.9
5.9
4.6

2009
-3.0
-2.9
-4.4
-4.1
-1.8
-3.2
1.0
-1.5

2010
1.2
1.0
-0.5
1.4
2.8
1.5
4.4
3.1

2011
2.4
1.4
1.1
3.5
3.9
3.4
4.9
4.9

2012
2.8
1.9
1.6
4.1
4.3
4.1
5.0
4.9

Companies around the globe have reacted to the falls in market demand and the drying up of credit
in a predictable fashion: they have implemented redundancies and cuts in expenditure. Scalpels
are also being applied to technology spending. Outlays on information technology (IT) contracted
sharply in the last quarter of 2008, according to IDC, an analyst Þrm. The latter’s current baseline
scenario foresees further contraction of spending in 2009, averaging -1.8% globally for the year.1
IT departments have lost no small number of staff in the mass redundancies that have shaken the
banking and other sectors over the past six months.
A look below the surface reveals silver linings to the technology cloud, however. IT equipment, such
as servers and personal computers, has suffered the sharpest cuts in business spending, according
to IDC, while spending on services and software during the crisis has tended to be more stable.
© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Technology industry analyst Robin Bloor sees the fall of equipment spending as the result not just of
poor market conditions but also as evidence of Þrms’ success in implementing new techniques, such as
server “virtualisation” (a method of partitioning a single server computer so that it can do the work of

several), to improve the efÞciency of technology.
The companies in our survey—and particularly those with a stronger tendency to pursue
opportunistic growth—have in fact been less inclined to cut spending on technology than that on
other parts of their operations in the past year. As we will discuss later, they are also more receptive to
selective new investments in technology than in other areas of the business in the coming 12 months.
This may be seen as a measure of the success with which organisations have used technology to
improve the way that they operate. IT is now deeply woven into the fabric of most companies (although
not yet everywhere in the world), underpinning processes in every part of the business. In the past ten
years senior business leaders—and not just chief information ofÞcers (CIOs)—have become convinced
of the productivity beneÞts and competitive edge that technology can provide, and for this reason they
are reluctant to suspend major technology-led initiatives.
Tough times nonetheless require tough decisions. Cost containment will remain the dominant
spirit of most senior management teams until the signs of recovery are clearer. In this environment,
far from all technology initiatives will survive the intensiÞed scrutiny of boards and chief Þnancial
ofÞcers (CFOs).
This report, based on a global survey of senior executives and in-depth interviews with CIOs, CFOs
and other decision-makers in the retail, technology and Þnancial services sectors, explores how
businesses are making technology decisions during the downturn. Which initiatives are seen as most
critical to Þrms’ renewed growth when the recovery comes? If cost containment is now paramount, is
the CIO’s and the IT function’s hard-won role as a “strategic partner” in the business under threat?
CIOs and other IT professionals are likely to Þnd our research Þndings on these and other issues
mildly reassuring. Every baseline scenario, however, has an alternative—usually gloomier—one to
accompany it. Should the economic crisis deepen and markets take far longer than expected to recover,
no category of business investment will avoid the scalpel.

6

© The Economist Intelligence Unit Limited 2009

Staying the course?
Technology decision-making in turbulent times

Key points

# Most Þrms will be seeking just to survive over the coming year, but many will take an opportunistic
approach to growth during the crisis.
# Growth-oriented companies are more receptive than others to considering renewed technology investment
over the coming year.
# Many of these Þrms view the crisis as a good opportunity to drive through major technology-led initiatives
in the business, although entirely new initiatives are likely to remain on hold.

Opportunity in adversity?

B

usiness leaders are wisely guarded in their expectations regarding market recovery, but many display
an opportunistic spirit when it comes to their own Þrm’s approach to the economic crisis. Just over
one-half of our survey respondents expect their Þrms to remain “on the defensive” over the coming year,
the dominant aim being to survive the crisis with minimal losses. A large percentage (44%), however,
state that management will be “on the offensive” when it comes to pursuing opportunities for business
growth. Whether this many will prove to be truly brave remains open to question, particularly if today’s
“green shoots of recovery” prove illusory and the crisis deepens. But the Þnding does suggest that far
from all Þrms plan to remain hunkered down for the duration of the recession.
The opportunistic group of companies will seek growth mainly by seizing market share where
customer churn is on the rise or where weak Þnances have put their rivals on the ropes. Macy’s, a large
US department-store chain, reßects this assertive attitude. Sunil Verma, the Þrm’s vice-president of
information technology, argues that the recession provides an opportunity for stronger companies to
beneÞt. “We deÞnitely have a sense that now is the time to position ourselves, to come out and grab
market share that’s going to become available when our competitors go out of business.”

Many Þrms in this group will also be on the lookout for merger and acquisition opportunities while
they can obtain good valuations of targets’ worth. In addition, some may move to launch new products
or services or enter new geographic markets, although these Þgure less prominently among growth
initiatives to be pursued while the crisis lasts.
If your firm will be “on the offensive” over the next 12 months when it comes to pursuing growth opportunities, which of the
following best characterises the approach it is likely to take? Select up to two.
(Top responses; % respondents)
Capture new market share from weaker rivals in current operating markets
50

Pursue new M&A opportunities to take advantage of good valuations
27

Expand into new product/service markets
26

Expand into new geographic markets
21

Accelerate R&D process to introduce new innovations to existing products
15
Source: Economist Intelligence Unit survey, March 2009.

7

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

How willing are those Þrms that claim to be growth-oriented to spend in pursuit of such initiatives?
Survey majorities in this group as well as the “defensive” group have been cutting costs in the business
since the onset of the crisis. A majority of the opportunistic Þrms say that they will be receptive to the
idea of renewed investing over the coming year, however—more so than the rest of the survey sample.
This does not mean that they will be spending aggressively: most will invest with caution, and many will
remain focused on cost reduction. But consideration of any investment at all is a more positive stance
than most Þrms have exhibited during the past year.

A good track record
Technology’s
positive impact
in most parts of
the business has
helped convince
management that
technology-led
projects should be
protected where
possible.

The IT function might once have been the obvious candidate to bear the brunt of cost-cutting in
tough times. This has changed. Firms in our survey that were cutting costs throughout the business
were asked to identify the operational areas where costs could be eliminated with the least impact on
business performance over the next 12 months. Only one-Þfth of respondents cite IT as such an area,
whereas operations and production, procurement and sourcing, and marketing are viewed as more
likely sources of fat that could be trimmed away without damage to business performance.
Why are IT budgets not suffering as much pain as other categories of spending in the business? One
reason is that many Þrms have already achieved a good deal of success in recent years in cutting their
operational IT spending through the implementation of efÞciency measures. It is the success with which

technology has impacted on other parts of the business, however—helping to cut costs, boost efÞciency
and create new opportunities to reach customers, partners and suppliers—that has done more to
convince management and boards that technology-led products should be protected where possible.
Executives at most Þrms in the survey are not inclined to suspend such projects. Less than onequarter of respondents hold the view that their Þrms should halt major existing IT-led initiatives until
Do you agree or disagree with the following statement: "We should suspend existing major IT-led initiatives until business
conditions improve"?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Total
4

20

26

22

26

36

14

Financial services
2

37

13

Consumer goods & retailing
8

19

28

31

14

IT & telecoms
3

18

18

46

16

Source: Economist Intelligence Unit survey, March 2009.

Do you agree or disagree with the following statement: "The economic crisis presents a good opportunity to drive through
major IT-led initiatives"?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Total
8

35

27

22

71

Financial services
11

36

31

18

4

Consumer goods & retailing
8

31

28

28

6

IT & telecoms
9

36

27

20

71

Source: Economist Intelligence Unit survey, March 2009.

8

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Share of respondents saying their approach to technology spending over the next 12 months is characterised by one of the
following two statements: "Invest in areas advancing your competitive advantage" or "Invest only in areas providing a clear
return on investment"
(% respondents)
Total
53

"Defensive" firms*
43

"Opportunistic" firms**
66

* Respondents expecting their firms to be "on the defensive" in terms of business growth

** Respondents expecting their firms to be "on the offensive" in terms of business growth

Source: Economist Intelligence Unit survey, March 2009.

business conditions improve. Forty-three per cent of respondents (and fully one-half of those in the
growth-oriented group) also believe that the crisis presents a good opportunity to drive through major
technology-led initiatives—a higher percentage than those who think the opposite.
This reßects a recognition that following through on existing technology-led initiatives is important
to Þrms’ ability to survive the downturn. Macy’s, for example, is embarking on a major cost-cutting
initiative that will involve laying off 7,000 people across the company. Mr Verma, however, reports that
his technology budget has increased this year, because the business did not want to cancel certain
projects that had already been approved. This is, he believes, because IT is recognised as a “strategic
partner” in the business.
It may be no surprise that the more growth-oriented of the surveyed Þrms are more receptive than
others to renewed technology investment. This should not be construed as an eagerness to embark on
entirely new initiatives during the economic crisis: the largest proportion of executives—from growthoriented and defensive Þrms alike—believe that now is not the time to pursue major new technology
investments. The opportunistic group, however, seems to be betting that driving through technologyled projects and increasing IT investment—at least selectively—in tough times will pay off in the form
of better competitive positioning come the recovery.
Mahendra Negi, CFO of Trend Micro, a Japan-based provider of content (or information) security
services, explains his Þrm’s approach to technology spending during these tough times: “When
everyone can spend, it’s hard to differentiate. We are in the position where we have the cashßow to
make investments. If we can do that, and our competitors are unable to, it can provide us with the
necessary differentiation.”
Mr Negi is not alone among Þnance executives in holding this view. Judging by the survey results,
CFOs are more positive about the outlook for technology investment in their Þrms over the next year
than for investment in the business overall. CFOs are more upbeat on near-term technology investment
than are CIOs. It is open to question how often technology investments will retain the support of CFOs
when other urgent business priorities are pressing. These relatively positive CFO views on investment
are nonetheless reßective of executive-suite hopes that technology will help Þrms to weather the crisis
and prepare for recovery.

9

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Key points

# CIOs are not losing inßuence over technology investment decisions as a result of the economic crisis.
# CIO-CFO relationships appear on the contrary to be getting stronger, or at least remaining stable.
# Investment decisions are taking longer, however, and the yardsticks of success are changing, with faster
returns being demanded.

How technology decisions are being made

T

echnology spending may be enduring less pain than other categories of business expenditure
during the current crisis, but it is coming under intensiÞed executive-suite scrutiny nonetheless.
The majority of businesses are now exercising tighter control from the centre over how money is
allocated to IT projects. More than one-half of surveyed executives, for example, say that their CFOs
will become more involved in IT spending decisions over the next 12 months than previously, while
43% of respondents say the same of their chief executive ofÞcers (CEOs).
However, where CIOs have established themselves—and the IT function—as central in the board’s
eyes to the success of the business, their positions are not being undermined as a result of the
crisis. Very few survey respondents (6%) believe that the inßuence of CIOs in technology investment
decisions will decrease in their Þrm over the coming year. A sizeable minority (28%, and 33% of those

from opportunistic Þrms), meanwhile, expect the CIO’s involvement in high-level business-strategy
discussions to expand.
CFOs are not riding roughshod over CIOs in decisions on technology investment. On the contrary,
their relationships appear to be getting stronger, or at least remaining stable. Nearly one-half of
surveyed executives maintain that co-ordination between CFOs and CIOs has improved over the past
year. A closer look reveals a perception gap: CFOs offer a rosier picture of the relationship than do CIOs
(see box). Very few among either group, however, report a decline in the strength of their relationships.
Our interviewees report stable or improving CIO-CFO relationships at their Þrms. Scott Floeck,
CIO of Nuance, a US-based provider of speech and imaging technology, says that the most notable
change at his Þrm is that his own Þeld of responsibility has been extended: “Both the CEO and CFO
Do you agree or disagree with the following statement about the role of senior executives in technology decisions:
"Co-ordination between the CIO and CFO has improved in the past 12 months"?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Total
11

37

40

3 2

7

Financial services
15

22

58 2 2 2

Consumer goods & retailing
11

36

39

6

8

IT & telecoms
10

40

35

4

3

9

Source: Economist Intelligence Unit survey, March 2009.

10

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

have always played an active role in the governance of IT investments. The difference now is that
I’m being asked to play a broader role and look at how we take the discipline used in IT decisions
and apply it to investments in other parts of the business.”
At Groupama Insurances in the UK, a broker-only insurer (which means that its products are
provided only through brokers), the process of deciding where IT spending should be directed has
remained constant, according to the company’s CIO, Jem Eskenazi. At the start of the budgeting
process, Mr Eskenazi discusses with the CEO which projects are urgent and which can be put off until
next year. He then holds discussions with each business unit about which of their development
requirements can be met in the coming year.
Even where the CFO has taken tighter control, the CFO-CIO relationship has remained positive. Mr
Negi relates that when he carried out the Þnancial planning for 2009 at Trend Micro, he imposed a cap
on most departments, keeping spending at 2008 levels, but when it came to IT he allowed the CIO to

propose the projects that he wanted to implement and then evaluated each one on its own merits.

Slower decisions, quicker returns
Senior management teams may be convinced of the need to push on with key technology investments,
but they are clearly scrutinising the technology investment proposals put to them more closely than

How CIOs and CFOs are really getting on
For the CIOs and CFOs participating in our survey, levels
of communication, trust and understanding of business,
technological and Þnancial objectives appear robust—more
evidence that IT is now considered a true partner in the business.
Few complaints emerge from either CIOs or CFOs in the survey about
the other’s commitment to making the relationship work. This is
not to say that they see eye to eye on every subject, however. CIOs
offer generally positive assessments of the state of relationships
at this level, but they are more equivocal than CFOs. For example,
78% of CFOs rate communication between CIOs and CFOs as strong
or very strong, while 56% of CIOs say the same. Similar disparities
are apparent when it comes to the extent to which CIOs and CFOs

agree on the major objectives of the business, as well as the degree
to which they understand each other’s key objectives. In assessing
mutual trust in their relationships, their views are more closely in
line, with 78% of CFOs and 66% of CIOs saying that trust is strong or
very strong.
The disparity suggests that CIOs are not fully satisÞed with the
state of relationships at the top level. While most believe that the
level of trust that they enjoy with the CFO is strong, many clearly
feel they are not being kept informed by CIOs as fully as they
should be. Moreover, many feel that the CFO still does not have a

full understanding of the technology imperatives for the business.
CIOs can be pleased with the conÞdence that they have won in
recent years within the executive suite, but many believe there is
much work to do before they truly become equal partners with their
Þnance counterparts.

How would you assess different facets of the relationship between the CIO and the CFO in your organisation? Share responding "strong" or "very strong"
in each facet.
(% respondents)
CIOs

Communication

CFOs

75

56

Total
58

Trust
78

66

59

Mutual understanding of each other’s key objectives

52

78

50

Agreement on the major objectives of the business
56

75

60

Source: Economist Intelligence Unit survey, March 2009.

11

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

No easy technology decisions at
decentralised retailers
Spar, a chain of convenience stores with its
international headquarters in the Netherlands,
has taken the decision to reduce its IT spend in
the economic downturn. Selected investments are
going ahead if they provide a demonstrable business

beneÞt, according to Roy Ford, retail IT controller of
Spar’s UK business, but making spending decisions
is not straightforward given the Þrm’s structure,
as the UK business comprises six separate regional
distribution companies.
Mr Ford is given a set of targets, and has to make
recommendations to the six constituent companies on

Boards are looking
for higher rates of
return and shorter
return periods.

how to achieve them. “In the past, investments have
been left more at local IT directors’ discretion, whereas
now the pressure is coming from the whole business.”
The six businesses will often have different
priorities, says Mr Ford. “What is important in one
might be stock management, so driving down stock
in stores might be a key priority, whereas another
will be concerned about business intelligence, and
therefore their priority is to get more information out
of the stores. The six different businesses all have to
be able to move at a speed they can deal with.”
Because the companies operate as a consortium,
there must be broad consensus about how money is
spent. “If four out of six want it, then the consortium
will pay for it. If only one company wants it, they will
normally have to fund it themselves,” says Mr Ford.

previously. Because of this, the investment decision-making process is becoming more deliberative.
Among our respondents, 40% say that the length of time it takes to reach decisions on technology
investments has increased over the past year, and more expect such proceedings to lengthen over
the coming year. The dire economic conditions currently prevailing clearly dictate the need for extra
caution and scrutiny.
Many executives report that more technology investment decisions require board-level discussion
than previously, and that there are more individuals involved in the discussions. “Whereas in the past,
I’d have been sitting around the table of the investment committee with the CFO and CEO, at that
same board we now have the line-of-business managers, our customer service people and others,”
observes Cory Eaves, CIO of Misys, a UK-headquartered technology services supplier to the Þnancial
and healthcare sectors.
The yardsticks of project success are also changing. When prioritising technology projects, it is clear
that boards are looking for higher rates of return and shorter return periods. Almost all the executives
interviewed for this report state that, at their Þrms, investments promising short- or medium-term
returns are currently favoured over longer-term projects.

To what extent do you believe the yardsticks by which your company measures the progress of technology investments will
change over the next 12 months as a result of the economic crisis?
(% respondents)

Substantially

Somewhat

Not at all

Don’t know/Not applicable

Total
21

54

18

7

Financial services
22

65

9

4

Consumer goods & retailing
14

58

19

8

IT & telecoms
30

46

19

5

Source: Economist Intelligence Unit survey, March 2009.

12

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

If you answered "substantially" or "somewhat" to the previous question, how do you expect the yardsticks to change?
Select up to two.
(Top responses; % respondents)

Financial services

Consumer goods & Retailing

IT & Technology & Telecoms

Periods for achieving ROI will be shorter
28

31

Total

34

31

Key performance indicators will be defined more tightly
34

39

29

32

Required rates of return on investment will be higher
23

39

31

30

Source: Economist Intelligence Unit survey, March 2009.

“Our expectations for ROI [return on investment] have changed,” conÞrms Mr Floeck of Nuance.
“Our focus is on getting a positive ROI measured in months, not years.” It is a similar story at
Groupama, says Mr Eskenazi. “We’ve Þne-tuned our key performance indicators over the last Þve years.
The only change for us this year is that we will probably not do a long-term project with an ROI in three
to Þve years; we’re looking at projects that have much shorter periods of return.”
Businesses are recognising, says Royce Bell, CEO of Accenture Information Management Services,

that they need to respond more rapidly to changing economic circumstances. This requires them not
simply to aim at faster returns on investment, but also to be able to drop projects quickly if necessary:
“Instead of saying ‘I now need to implement this project, and it will take 18 months’, they are trying to
implement it in a more agile fashion: ‘We’ll do the Þrst three months, see where we are and then see if
it still makes sense.’ ”

13

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

Key points

# Customer service will remain a priority area for IT investments over the coming year, particularly as
customer disloyalty and churn increase.
# Many Þrms will prioritise spending on information-management initiatives, to continue improving their
understanding of customer behaviour.
# Within IT, server-virtualisation initiatives will be pursued, as these promise to deliver early cost savings,
while projects with longer-term returns (such as services-oriented architecture, or SOA) may be delayed.

Technology choices

G

Rising customer
churn means
that retention of

existing customers
will likely take
priority over
acquisition of new
ones over the next
year.

iven tighter budgets, greater scrutiny and more demanding measures of success, what types of
technology choices are Þrms making? As suggested, many Þrms are putting off longer-term IT
projects where it is tougher to demonstrate an early beneÞt to the business. Groupama, for example,
has decided to decelerate the transition to SOA. Although SOA will provide business beneÞts, says
Mr Eskenazi, it does not offer an immediate ROI. Projects going forward for his Þrm include the
development of an extranet to improve communication with brokers, and connectivity to aggregator
sites that provide comparative insurance information to customers.
Customer service will remain a priority area for IT investments over the coming year, for a good
reason: companies can ill afford to lose customers in a downturn. As Mr Negi of Trend Micro argues,
“Acquiring customers is always expensive. If you lose your customers, it’s very expensive to replace
them.” This being the case, companies will probably need to be ready to spend more: Þrms in many
sectors, and especially retail and consumer goods, report rising rates of customer churn as consumers
and businesses seek lower prices more aggressively.
For this reason, the acquisition of new customers will probably take a back seat to customer retention
over the coming year. Says Mr Bell: “People have realised that the cost of customer acquisition is huge,
and the people you acquire tend not to be loyal anyway. So quite a lot of customer-segmentation
analysis is devoted to determining which customers are more important and which to spend money on.”
Reduced customer loyalty may be one consequence of the recession that persists well after markets
recover. Mr Bell maintains, however, that companies’ focus will eventually have to return to the
acquisition of new customers. For the moment, he believes, Þrms are not looking that far ahead; the
priority for most businesses is to emerge from the recession leaner and more agile.
In your view, IT-led initiatives in which of the following areas should enjoy the highest priority over the next 12 months?
(% respondents)

Financial services

Consumer goods & retailing

IT & telecoms

Customer service
55

25

42

Total
36

Information management (the flow and quality of management and other business information)
20

61

33

34

Supply-chain efficiency
13

50

24

30

Source: Economist Intelligence Unit survey, March 2009.

14

© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

In which of the following areas would better information and analysis most help you to make sound decisions during the next
12 months? Select up to two.
(Top responses; % respondents)

"Defensive" firms*

"Opportunistic" firms**

Customer behaviour/preferences
55

48

25

42
36

Total
42

Competitor activity
20

61

33

31

33

32

Pricing trends in your markets
13

36

50

24

27

31

Financial performance
27

33

* Respondents expecting their firms to be "on the defensive" in terms of business growth
** Respondents expecting their firms to be "on the offensive" in terms of business growth

30

Source: Economist Intelligence Unit survey, March 2009.

Partly for this reason, a large number of Þrms will also give priority to investment in improving the
quality and ßow of information. When asked where better information and analysis will help them
most in the coming year, the largest number of survey respondents (42%) say that achieving a deeper
understanding of customer behaviour will be their foremost objective.
Better information is needed in more areas than this, however. The past two years have made it clear
that Þrms in many industries—not just Þnancial services—have made some extremely poor decisions,
owing to factors such as inadequate due diligence in acquisitions, overexposure to weak suppliers or
even a poor appreciation of their own Þnancial situation. When it comes to getting better information,
the growth-oriented Þrms in our survey place emphasis on improved visibility and analysis of Þnancial

Improving customer service:
routine but vital
Since the Þnancial crisis began, Mahendra Negi,
CFO of Trend Micro, a global network-security
services provider headquartered in the Japanese
capital, Tokyo, has insisted on budget cuts in several

departments, but with IT he has taken a different
approach, allowing the CIO to put forward proposals
and then approving those investments that provide
a high return. Customer service is one area where
technology investments are being considered.
For example, whereas Mr Negi has decided that an
upgrade to new desktop software can wait another
year, problems with a call-centre operation in the
Philippine capital, Manila, that caused a drop in
satisfaction levels among customers resulted in the
immediate implementation of an upgrade.
Enhancing their understanding of customer needs
is also a priority for companies, particularly as buying
behaviour undergoes change in a recession. Retail and
consumer-goods Þrms, which are at the sharp end of
15

interaction with consumers, place stronger emphasis
than other Þrms in our survey on IT spending over the
coming year to improve information management.
Nick Wharton, CFO of UK automotive-products retailer
Halfords, believes that at times of economic pressure
all businesses need to improve the quality of their
information in order to make better, faster decisions
and allow them to Þne tune the service they provide
to customers. “This is particularly important in
retail,” he says. “Halfords has over 10,000 products
in its stores, so it is important to understand what
promotions are working well when we put certain
products together at certain price points. In addition

to further investment in our multi-channel offering,
we will also invest more this year in improving key
management information.”
“In recessions,” Mr Negi reminds us, “customer
requirements change, because they are struggling
through the same difÞculties we are experiencing.
Like us, they have to prioritise investments. If a
company doesn’t adapt to the changed requirements
of its customers, the chances are that it will be
disrupted by a competitor or new entrant.”
© The Economist Intelligence Unit Limited 2009


Staying the course?
Technology decision-making in turbulent times

performance and competitor activity, as well as of customer behaviour.
Within the IT function itself, server virtualisation is a priority among several of the CIOs whom we
interviewed, because of the quick returns achievable in terms of reducing data-centre operating costs.
Firms are also exploring the cost-efÞciency beneÞts of utilising “cloud computing”, a model whereby
IT services are managed by external, web-based parties. Although it has not yet been taken up widely,
analyst Robin Bloor believes that Þrms will begin to appreciate the quick wins that cloud computing
offers, if nothing else in terms of saving on operational costs.

16

© The Economist Intelligence Unit Limited 2009


Staying the course?

Technology decision-making in turbulent times

Conclusion: Investing for the future

B

usinesses understand the need to keep an eye on the long game: while trying to keep IT costs
low in the short term, they also know that continued, selective investment will help them to stay
ahead when the recession ends. Major projects initiated before the downturn are, by and large, being
driven through rather than halted, in recognition of the fact that they have longer-term value to the
business. New technology projects, however, are currently being considered only if they offer clear and
early returns for the business.
It is a delicate balance. Boards recognise that successful planning for the long term is likely to mean
funding projects that have no immediate return. The problem of how to square short-term cost-cutting
with long-term investment is never an easy one to solve, and few of the Þrms surveyed or interviewed
for this report appear yet to have done so. The challenge is particularly difÞcult when, as Mr Bell puts
it, markets are jittery and investors are generally in it for the short term only.
Some risk-taking investment is necessary, however, if companies want to emerge from the downturn
ahead of the competition. The management of opportunistic Þrms that are planning to be “on the
offensive” during the coming year are conÞdent that IT will help to deliver the competitive edge they
are seeking, and they are willing to maintain investment in major technology projects to ensure that
this happens. For CIOs and the IT function, this raises the stakes: the inßuence in the business that
they have fought so hard to gain will be at risk if they do not deliver.

17

© The Economist Intelligence Unit Limited 2009


Appendix

Survey results

Staying the course?
Technology decision-making in turbulent times

Appendix: Survey results
In February-March 2009 the Economist Intelligence Unit conducted a survey of 267 executives of
companies from around the world. Our sincere thanks go to all those who took part.
Please note that not all answers add up to 100%, either because of rounding or because respondents
were able to provide multiple answers to some questions.

By when do you think conditions in your market(s) will have
recovered fully from the downturn?

How well-positioned is your company, compared to your main
competitors, to weather the downturn?

(% respondents)

(% respondents)

Mid-2009

Better

0

54

End of 2009

The same
9

38

Mid-2010

Worse
31

End of 2010

6

Don't know/Not applicable
26

2

2011 and beyond
27

Conditions will never fully recover to those prevailing before 2008
3

Don't know
4

Thinking more generally about your business, do you believe that your senior management team will approach the next 12

months primarily on the defensive or on the offensive, in terms of business growth?
(% respondents)
On the defensive (ie, simply surviving the crisis with minimal business losses)
51

On the offensive (ie, seeking new M&A opportunities, or capturing new market share)
44

Don’t know
6

If you selected “On the offensive” in the previous question,
which of the following best characterises the approach your
firm will likely take over the next 12 months?
Select up to two.

Which of the following best characterises your company's
approach to spending in the business overall since the onset
of the financial crisis?
(% respondents)

(% respondents)
Cut costs across the board
Capture new market share from weaker rivals in current operating markets
50

29

Cut spending selectively

Pursue new M&A opportunities to take advantage of good valuations
27

39

Hold spending constant

Expand into new product/service markets
26

11

Invest in areas advancing your competitive advantage

Expand into new geographic markets
21

10

Invest only in areas providing a clear return on investment

Accelerate R&D process to introduce new innovations to existing products
15

Other, please specify
3

Don't know/Not applicable

9

Other, please specify
0

Don’t know/Not applicable
2

1

18

© The Economist Intelligence Unit Limited 2009


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

Which of the following do you expect will best characterise
your company's approach to spending in the business overall
over the next 12 months?

Which of the following best characterises your company's
approach to technology spending since the onset of the
financial crisis?

(% respondents)

(% respondents)

Cut costs across the board

Cut costs across the board
13

14

Cut spending selectively

Cut spending selectively
26

32

Hold spending constant

Hold spending constant
10

22

Invest in areas advancing your competitive advantage

Invest in areas advancing your competitive advantage
27

Invest only in areas providing a clear return on investment

15

Invest only in areas providing a clear return on investment

21

14

Other, please specify

Other, please specify

1

0

Don’t know/Not applicable

Don’t know/Not applicable

2

2

Which of the following do you expect will best characterise
your company's approach to technology spending over the
next 12 months?

If cost-cutting is a priority throughout the business, in which
of the following parts of your organisation do you think that

costs can be reduced with the least impact on performance
over the next 12 months? Select up to two.

(% respondents)

(% respondents)
Cut costs across the board
Operations and production

8

Cut spending selectively

33

Procurement/sourcing

20

Hold spending constant

31

Marketing

15

Invest in areas advancing your competitive advantage

25

27

IT

27

Finance

Invest only in areas providing a clear return on investment

22

Other, please specify

16

Research & development

1

Don’t know/Not applicable

16

Supply chain

4

11

Sales
7

Customer service
4

Other, please specify
5

Don’t know/Not applicable
6

Do you agree or disagree with the following statements about IT initiatives and investments?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Now is not the time to pursue major new technology investments
14

27

19

28

12

We should suspend existing major IT-led initiatives until business conditions improve
4

20

26

36

14

The economic crisis presents a good opportunity to drive through major IT-led initiatives
8

35

27

22

71

We should wait to see how our competition is investing in technology before deciding on our investments
4

19

9

23

33

27

© The Economist Intelligence Unit Limited 2009

3


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

While economic and market conditions remain difficult, what
do you think should be the primary objective of IT initiatives
in your organisation over the next 12 months?
(% respondents)
Find new ways of reducing cost by streamlining processes
46

Improve information access to facilitate better decision making
19

Increase speed and agility
16

Build new channels of reaching customers (eg, web portals)
13

Improve security and minimise risk
5

Other, please specify
1

Don't know/Not applicable
0

In your view, IT-led initiatives in which of the following areas should enjoy the highest priority over the next 12 months?
Select up to two.
(% respondents)
Customer service
36

Information management (the flow and quality of management and other business information)
34

Supply-chain efficiency
30

E-business (eg, online selling, supplier portals, etc)
16

Risk management
15

Business process outsourcing
11

Enterprise mobility
10

Customer segmentation
10

Compliance and governance
8

Reducing carbon emissions
3

Other, please specify
1

Don’t know/Not applicable
1

How has the time required to make decisions on technology
investments changed over the past 12 months?

How do you expect the time required for decisions on
technology investments to change over the next 12 months?

(% respondents)

(% respondents)

It takes us longer to decide on an investment

It will take us longer to decide on an investment
40

43

No change

No change
45

We have accelerated the time it takes to decide on an investment

30

We will accelerate the time it takes to decide on an investment

11

Don’t know/Not applicable
3

20

21

Don’t know/Not applicable
6

© The Economist Intelligence Unit Limited 2009


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

If you responded above that it has taken/will take longer to decide on technology investments, what are the main reasons for
this? Select up to two.
(% respondents)
There is need for extra caution and scrutiny due to the economic conditions
44

More technology investments now require board-level discussion
20

There are more executives involved in the decision than previously
18

More technology investments now require input or approval from line-of-business managers

8

The information required to make the decision is not available quickly enough
7

The information required to make the decision is not of sufficient quality
5

Other, please specify
2

Don’t know/Not applicable
16

How would you assess the information currently at your disposal for making key decisions about investments in your part of
the business? Please rate for each listed information attribute.
(% respondents)

Very good

Good

Neither good nor poor

Poor

Very poor

Don't know/Not applicable

Sufficiency
10

56

26

8

Accuracy
7

52

26

12 2 1

Depth of analysis
9

41

28

19

3

Timeliness

5

42

33

19 2

In which of the following areas would better information and
analysis most help you to make sound decisions during the
next 12 months? Select up to two.
(% respondents)
Customer behaviour/preferences
42

Competitor activity
32

Pricing trends in your markets
31

Financial performance
30

Input costs
20

Project status reporting
11

Supplier performance/health
6

Performance/health of potential acquisition targets
6

Compliance with regulatory requirements
6

Other, please specify
1

Don’t know/Not applicable
1

21

© The Economist Intelligence Unit Limited 2009


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

How do you expect the involvement of different executives in decisions about business strategy will change over the next
12 months?
(% respondents)

Will increase

Will remain the same

Will decrease

Don't know/Not applicable

CEO
55

42

31

12

4

CIO/CTO
28

56

CFO/Finance director
53

40

5 2

IT director
15

63

18

4

Line-of-business heads
34

53

11

3

How do you expect the involvement of different executives in decisions about technology investments will change over the
next 12 months?
(% respondents)

Will increase

Will remain the same

Will decrease

Don't know/Not applicable

CEO
43

50

4

3

CIO/CTO
39

51

6

4

CFO/Finance director
52

42

4 2

IT director
33

55

8

3

Line-of-business heads
26

55

14

4

Do you agree or disagree with the following statements about the role of senior executives in technology decisions?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Co-ordination between the CIO and CFO has improved in the past 12 months.

11

37

40

3

2

7

Almost all technology investments—not just major ones—must now be approved by the CFO
14

44

25

12 1

4

When it comes to cost-cutting decisions, the CFO should take the lead even when it comes to technology, and the CIO’s role should be to help
implement these decisions.
12

30

24

22

8

3

How would you assess different facets of the relationship between the CIO and CFO in your organisation?
(% respondents)

Very strong

Strong

Neither strong nor weak

Weak

Very weak

Don't know/Not applicable

Communication
11

47

26

71

8

25

71

8

13 1

7

7 2

7

Trust
12

47

Mutual understanding of each other’s key objectives
9

43

27

Agreement on the major objectives of the business

13

22

47

24

© The Economist Intelligence Unit Limited 2009


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

To what extent do you believe the yardsticks by which your
company measures the progress of technology investments
will change over the next 12 months as a result of the
economic crisis?
(% respondents)
Substantially
21

Somewhat
54

Not at all
18

Don’t know/Not applicable
7

If you answered "substantially" or "somewhat" to the previous question, how do you expect the yardsticks to change?
Select up to two.
(% respondents)
Periods for achieving ROI will be shorter
34

Key performance indicators will be defined more tightly
32

Required rates of return on investment will be higher
30

Frequency of progress reports will be higher
24

Project status reports will give greater prominence to business targets than before
20

Key performance indicators will be more numerous
17

The risks will be defined more clearly
13

Other, please specify
0

Don’t know/Not applicable
0

20. Do you agree or disagree with the following statements about change in the monitoring of major technology and other
investments and projects throughout the business since the onset of the financial and economic crisis?
(% respondents)

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Don't know/Not applicable

Our information requirements prior to making an investment decision have become more demanding
18

64

13

31

The quality of information we receive about investments has kept pace with requirements since the onset of the crisis

4

41

39

14 1 1

We rely on technology to monitor, analyse and plan investments within my business, including investments in technology and other areas
9

23

46

29

© The Economist Intelligence Unit Limited 2009

14 2


Appendix
Survey results

Staying the course?
Technology decision-making in turbulent times

In which region are you personally based?

What is your primary industry?

(% respondents)

(% respondents)
Financial services
21

Western Europe

27

Asia-Pacific

25

North America

24

IT
15

Telecoms
10

Consumer goods

Middle East and Africa 10
Eastern Europe

7

Latin America

6

9

Manufacturing
7

Professional services
7

Healthcare, pharmaceuticals and biotechnology
5

Technology
4

Retailing
4

Chemicals
3

What are your organisation's global annual revenues in US
dollars?

Construction and real estate

(% respondents)

Energy and natural resources

3
2

Government/Public sector
$500m or less

36

$500m to $1bn

10

$1bn to $5bn

18

$5bn to $10bn

9

$10bn or more

27

2

Transportation, travel and tourism
2

Agriculture and agribusiness
1

Entertainment, media and publishing
1

Education
1

Logistics and distribution
1

Automotive
1

24

© The Economist Intelligence Unit Limited 2009