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This was the headline of an October 6th article written by the folks over at Gartner. I believe it is true that everyone is bracing for an overall slowdown in the economy, if they are smart, but for the IT industry an economic downturn can be something to take advantage of as more businesses look to cut threir costs by outsourcing.

Now I am not arguing that IT companies around the country are not seeing clients drag their feet on signing large and small capital projects, or that we all are not experiencing our current clients tightening their belts a bit. I had a client, they are in the financial industry, write to me the other day: “I request the need for 30 days notice to change our contract to be waived, this financial crisis is for real” - and we were only talking about $500 per month.

I tell you this to make sure you know I believe this downturn is for real and that I also believe the recovery will not be as sharp an upslope as the downslope was.

What I feel is true about this downturn for IT providers is that we all can be smart and position ourselves as providers  in a way that allows us to continue growing through 2009 despite the downturn.
In the Gartner article they go on to suggest all IT managers prepare for one of three likely outcomes for next year:

- 2009 IT spending will not exceed 2008 annualized IT spending levels.

- 2009 IT spending will be 80% of 2008 annualized IT spending levels.

- 2009 IT spending will be 105% of 2008 annualized IT spending levels.

Now I don’t know about you but if I am careful about spending and any one of these scenarios takes place I should still be able to post some good growth numbers in 2009. Obviously if scenario three comes true vs. scenario two we should do much better but the point is that even if the worst scenario takes place we all should be OK as long as we are smart about spending and expenses starting now.

I think the trick is to be out in front of your customers helping them figure out how to handle and manage their IT budgets for success over the comming year. There are plenty of creative ways to position your service / products and show your clients the better ROI working with you than doing it another way. How can you change your offering or add another product to your line that allows you to cut your clients costs while providing the same / better / or a similar server that you are today?

In the end our clients need IT to run their orgnaizaitons and we need to show them the best most cost effective way to do it even if it takes a bit of money out of our pocket in the short term as we allow them to adjust their costs down. Ultimately this will allow us to hold on to the majority of our good revenue, as we watch expenses, and figure out what the growth curve for 2009 will look like.

Let me know what types of things you are planning to stay ahead of the inevitable cost cutting in your client base.

JC

Well, I can think of a few things, but the first thing I did was:

Examine my overhead expenses with a fine-toothed comb!

When you are working with a relatively new model - like managed services - and pressing for aggressive growth, it can be difficult to watch your overhead very carefully at the same time.  I’m not suggesting that we got sloppy - we’ve always been a frugal company - but we did experience some “expense creep.”

By going through our P&L very carefully and asking “Do we really need this?” to every expense, we were able to add several points to our bottom line.  That’s the kind of cushion you need during tough times, and it gives us more money to spend on sales and marketing efforts.

I highly recommend that you go through yours and be aggressive about making cuts where you can - it can make the difference between a healthy company and one heading for trouble.

MRC