5 Hacks to Prepare IT for a Recession
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There's an interesting trend happening in the stock market that could significantly impact IT over the course of the next year that’s connected to the current position in the financial credit cycle.
I recently read a great article, "Will the stock market crash in 2016?" and it got me thinking about how another recession would affect the businesses we work with so I'll paraphrase some of the key takeaways below:
"Over the Holidays the FED, who controls the credit cycles in the US, increased their rate and manipulated the supply of money by adjusting the amount of loans and borrowing allowed. What this means is that dollars/credit is going to become less available and difficult to obtain by businesses." This becomes especially challenging for businesses that have been aggressive in financing their growth with debt (a high Debt/Equity Ratio). I suggest checking out your company's Debt/Equity Ratio on Yahoo! Finance to see how they use debt as a means for growth.
Anyway, "As a result, when credit is tightening, businesses have less money to spend, which reduces their annual revenues and subsequently their net incomes. If you take a look at the profit margins at the end of 2015 there was a large decline, meaning companies are making less money, which is why this has also been a leading indicator of an upcoming recession." There are obviously other forces contributing to this idea of another recession, but a company's inability to borrow money really struck a cord. This trend doesn't look promising for companies, and this is really important to IT.
Changing economic conditions require a change in thinking. Business will start to become more diligent about where they are spending money, and those places typically come at the expense of IT. You’ll be tasked to “keep the lights on” and reduce unplanned spend, while continuing to move the business forward with new initiatives to stay relevant in a tight market. Kind of a terrible Catch-22, isn’t it?
Whatever your IT strategy is for a recession, don’t be cheap. There is such thing as "good spending" and it comes from IT investments that will add to your organization’s operations and productivity. Below are five IT focus points you should consider to prepare for a possible recession:
- Security: Protect your environment because no business can afford a loss in productivity, especially during a recession.
- Managed Services: Proactive monitoring limits potential problems that create unplanned spend that incur a much higher service costs.
- Maintenance: Audit your existing maintenance contracts to uncover hidden cost savings.
- Backup & DR: Similar to Security, no business wants operations to stop and impact the front-line business applications.
- Applications: Continue to make operations more efficient since productivity is key in slow markets.
All of these areas are exactly where Presidio is helping businesses plan for as one of the largest technology resellers in the country specializing in five main pillars of enterprise IT; Data Center, Enterprise Networking, Collaboration, Security, Managed Services.
To be the Devil's advocate, there's honestly no way of predicting what will happen or what businesses will do, but if you fail to plan, then you can plan to fail. When times get tough I think you'd rather have a solution to the problem than none at all.
Contact Matt Rutter, Account Manager, Presidio at [email protected] to see how we can help your business with whatever the future holds.
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