Spend, spend, spend - but integrate, integrate, integrate

While the world economy has not technically fallen into a recession, it has hovered on the brink for so long that it certainly feels like one.

The current 'downturn in economic activity' has had a particularly devastating effect on the telecommunications and computer industries with massive job cuts, plummeting share prices and thin, if any, profits. As businesses grow more cautious in uncertain times and face tightening budgets, expenditure on technology renewal is an obvious candidate for review.

According to the US Commerce Department, technology spending in the US corporate sector had fallen by 17 per cent by mid 2002 from its high spot at the end of 2000. The rest of the world has, inevitably, followed the US trend.

The general economic downturn also coincided with the end of a cycle of frenetic innovation and technological advance through the 1990s. Following the rapid spread of PC's, networks, the World-Wide Web and mobile telecommunications, terminating with the Herculanean effort to re-engineer the world's IT system for the Year 2000, the last decade of the 20th century was truly momentous.

No wonder businesses are still taking it all in and remain reluctant to take on another wave of technological advance without, at least, a pause for breath.

Unfortunately the modern business environment does not allow pauses for breath. Despite continued uncertainty, there is evidence that the effects of the downturn on IT spending could end soon. While Instat/MDR is gloomy about 2002, it expects a combination of new products and pent up demand to push PC market growth back up again in 2003: 'PC market growth will rebound to 13% in 2003.'

There are other forces driving a renewal of expenditure on information technology. The continued need to improve efficiency and productivity, to cut costs and maintain competitiveness all make it hard to take that much-needed breather.

As if this were not enough, many sectors of industry face increased regulation which has significant implications for IT systems. The financial services industry, for example, must meet new regulations on risk management which will require substantial change to business processes and existing IT systems.

In addition many financial organisations must upgrade their systems to speed up processing for financial market transactions. And the obligation to archive the rapidly-growing volume of email affects an even wider group.

Taken together, the forces driving technology renewal are irresistible. The form this takes in the more constrained modern business environment is clearly different to that which prevailed in the 1990s. During times of strong growth, companies can afford to invest in new technology and potential new markets. When times get hard and funding scarce, it is more of a challenge.

But even in tough times organisations of every size must plan for a return to more stable economic growth and take a long-term view alongside the need for short-term expediency. Caution and prudence are still essential and spending plans must, of course, be tied closely to genuine business benefits and a rapid return on investment.

History shows, however, that businesses that stand still during a downturn are ill-equipped to take advantage of a switch in market fortunes.

The priority for many organisations is to rationalise their IT infrastructure. The change wrought by advancing technology over the last decade has led to a proliferation of different platforms and incompatible application systems which must be brought together for many reasons.

Integrated business processes and IT infrastructure can cut costs, improve efficiency, enable regulatory compliance and provide a foundation for future development.

Business process rationalisation and integration cuts administration costs and improves efficiency. Integration also reduces costs by consolidating technology around a limited number of platforms. Not only does this enable organisations to take advantage of economies of scale, it also cuts management overheads and focuses the skill pool on strategic technologies.

Many organisations are, for example, faced with a growing demand for integrated customer service. Banks are obliged to offer customers access through the traditional branch, a call centre, the Internet and over the telephone. Soon they will also have to provide mobile phone facilities and, not too far in the future, access from interactive digital televisions. The public utility companies and retail organisations face similar demands for high-quality, integrated customer service.

Manufacturing and distribution organisations also need to work towards integrated business processes and IT infrastructures to meet the challenges of e-commerce. They must be able to link their IT systems to their suppliers and partners to exploit fully the cost savings that e-commerce can bring.

Integrated communications and information processing systems underpin common business processes. The organisations that can successfully re-engineer their business processes and the technology infrastructure which supports them will thrive. Those that do not will lose customers.

Integration not only helps to meet current challenges - it can also provide a lasting foundation for future developments. A well-thought out IT infrastructure will be able to accommodate novel technologies such as mobile devices and digital television alongside existing technology.

Re-engineering processes and technologies that have evolved over ten or 20 years is a huge challenge and few organisations are in a position to go right back to the drawing board and start from scratch.

Budget constraints and business priorities prohibit a 'Big Bang' approach. Progress must come from identifying pragmatic actions which meet short term challenges - but within the context of a long-term integration strategy.

Typically hardware technology sits at the top of the list. But investment in hardware-independent software can deliver a much faster return on investment with far less effort. Many organisations have, for example, recognised importance of standards-based middleware as a tool for integration.

Improved network control and systems resource management can also serve the long-term cause of integration, and yet still deliver short-term benefits by getting more out of existing hardware.

Integrated storage management is another example. By separating storage management from hardware, organisations can make immediate savings from better use of resources and lay a long-term foundation for the future.

VERITAS, for example, expects to save a typical customer hundreds of thousands of dollars in hardware expenditure through more efficient use of existing storage resources. Such savings enable greater investment in other areas of integration.

No one knows when the current downturn will end. But the combination of pent up demand and new products suggests that technology spending will see a modest turnaround quite soon. Businesses still need to find ways to cut costs by automating processes and refining their technology infrastructure to cope with market demand and technology advances.

Tight budgets limit investment options to those that can deliver short-term gains in a slow market. Organisations that put these short term gains within the context of a long term integration strategy are likely to be the ones best prepared for a new period of economic growth.