Thursday, July 17, 2008

The Big Squeeze

The US Economy continues to put the squeeze on individuals and organizations, and the impact of that squeeze is increasingly global. Many clients I have visited in the past month seem winded, bracing for another blow. Almost universally, budgets are shrinking. For many organizations, those budget cuts will lead to staff reductions. It is not as simple as “the economy”, however. The combined forces of the subprime mortgage crisis, oil prices, and geopolitical instability create an emotional, economic, and increasingly intransigent gravitas. Personal reactions to the economy— from “staycations” to the avoidance of large purchases —clearly influence the behavior of corporations. After all, the corporation is, as its etymology suggests, a virtual body: a collection of humans acting as a single entity.

The various corrective actions taking place, especially in financial services, are necessary. Like the resetting of a broken bone, much pain is involved, but it ensures that the injury heals correctly. The end state is unknown: predictions about recovery are mocked by the markets. We need to stop thinking that the recession is ending (it has already begun) and look realistically at the moment. Stand firm. Use what you already own.

Yet even in their weakened state, corporations (or other types of organizations) must continue to function. IT has a role to play in this functioning, but it may not be the exciting, heroic role that some have described. The role of IT in this downturn is more like a trusted mechanic: one who works magic on your aging vehicle without fleecing you. The time for that mechanic to be honest about the viability of your vehicle will come, but not now. They just keep it running.



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