Information Technology Investment and the Paradox of Thrift

Aligning IT Budget Strategy with Keynesian Economics

We're in a somewhat unusual paradox where getting increased IT budget authority during these challenging economic times is difficult, however, IT can maximize its spend and value to the business due to the purchasing power created by these challenging economic times.

The global economy continues its delicate recovery while in parallel delivering information technology (IT) purchase opportunities for savvy IT managers. For many businesses, now is not the time to continue cutting back on information technology services and investments. There's no more fat to cut. Now is the time, while prices, discounts, terms, warranties and related professional services from your vendors may never be better, to invest again so you increase technology services and be ready for the recovery that is desperately clawing for some traction.

If the business leaders at your company need some convincing to increase IT budget authority in order to capitalize on the buying opportunity, perhaps you will be well served to put the investment in business terms. In fact, this IT procurement opportunity is much aligned with the theory of the "paradox of thrift," refined by the late English economist, John Maynard Keynes. In the 1930s, Keynes explained that while saving money is wise in hard times, there can be a danger of businesses saving too much and not putting enough back into the economy through the buying of goods and services. And when an economy is having trouble, Keynes argued, that is precisely the time to spend money to help stimulate activity again, and benefit in the process.

Of course, not all economic experts agree. There are certainly competing arguments which suggest Keynes theory is outdated and oversimplified and that the current economic environment is far different than it was back in Keynes' time and during the Great Depression. Nonetheless, if you refine and investigate further, what we have right now is an IT buyer's market, from software to hardware to services to solutions across the board.

Many IT vendors have suffered since the economy began falling in late 2007 and then nose-dived in 2008. Those IT vendors want your business and are demonstrating a never before seen flexibility to earn your business.

From hardware upgrades to the latest information security products to new business software systems such as customer relationship management (CRM) software and enterprise resource planning (ERP) deployments, making IT purchases this year could represent a materials savings, and reduced risk, compared to the same IT purchases made in the near future.

Imagine being able to get that new ERP system or CRM software for 40% to 60% less than you would have paid two short years ago, or may pay two years from now, along with a hefty throw-in 24 by 7 service contract, enhanced service level agreement (SLA) or other sweeteners. Those types of deals are occurring now, while the vendors are hungry, but its unlikely they last once the economy starts to rev again.

You may have to get tactful in changing the company thinking from a mindset where you can't afford to buy this stuff now - to you can't afford not to buy this stuff now. You'll also have to demonstrate supportable ROI, but doing so will be easier when costs are lower. Most importantly, demonstrate real value to the business. Show how these purchases will help your IT operations, your business users and your customers. Remember them, your customers? They're the whole reason you're in business in the first place. If you always strive to help them, you will solidify your relationships and customer share, which is a good event in the good times but an invaluable life ring when times get tough.

So, no matter how tight your company's purse strings are right now, it's time to take a new look at your IT systems, including ERP and CRM, and see what you need to be doing right now to get ready for the economic recovery to come.

Making smart information technology investments today will result in spending less than you would have spent yesterday or tomorrow, and you will better serve your internal and external customers while readying your company for renewed growth, success and poise for the future.