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Summary: To deal with economic downturns and recessions, companies must invest in advanced digital solutions to pivot efficiency and adaptability so that they can maximize business value and achieve a steady state of organizational and financial growth. 


Recently, I went through a digital leadership report from Nash Squared stating that 81% of leaders are expecting a global and national economic downturn, 46% of them are still planning to make bigger investments in technology, and 47% are looking to increase their headcount over the next one year.   

The numbers show a positive momentum in digital investments regardless of the fact that we are, most probably, going to face an economic slowdown and global disruption. With the rising fear of inflation, CIOs and CTOs are about to feel the pressure to prove the business value of IT spending.  

While the response to the COVID-19 pandemic necessitated remote working, rapid digital transformation, and new delivery models, this economic headwind demands something very different; it would need organizations to rationalize and optimize IT resources in modern and efficient environments without deviating from their futuristic tech strategy.  

Making the Right Digital Bets at the Right Time 

Improving existing systems is not just the role of technology. It can help us redefine what we do and prepare us for the unseen and unknown. And if technology is a 'blessing,' this is high time to utilize it to come through disruptions without digging a hole in pockets.   

My view is that digital investments are not only about money; it's about taking up a shield in the face of an imminent storm.   

On one hand, the overall performance of the organization is directly connected to you as a C-suite leader. And on the other, the current economy is seeing a very high demand for services and a low employment rate compared to that. So, investing in automated tools and processes is an opportunity to drive efficiency or inspire organizations to do things differently, as they did during the pandemic. 

Therefore, deploying the right IT investment strategy under the threat of recession will help businesses:  

  • Make the best use of disruptive innovations 

  • Reduce the cost of operational overheads 

  • Get a competitive edge during a downtime 

  • Improve employee and customer experience 

Defend or Increase Investments in Portfolio Rationalization and Cost Optimization 

Portfolio rationalization and cost optimization must be the top priorities of CTOs in order to defend or increase funds in light of mounting financial pressures. When organizations run on software assets, they should be well-versed with application development types and weigh up the digital platforms they own to improve cost efficiency.   

This, in turn, will lead to cost optimization through a careful digital investment focusing on an easily manageable digital ecosystem and reduced total cost of ownership. 

This covers technology optimizations like vertically-aligned IoT and edge use cases, integrated software delivery platforms, intelligent document extraction, core enterprise applications, adaptable operational infrastructure, distributed data systems, and of course, cloud cost optimization 

Avoid or Decrease Investments in Risky or Obsolete Technologies 

Certain technologies either become outdated or risky investments in challenging economic conditions. Cost control was a major area of concern for us after the pandemic when businesses had to cease their operations.   

The end goal is to be cheaper from an economic standpoint and better from a sustainability standpoint to keep our business running during the recession. 

Any tech leader, in any position and any organization, should think about delivering 360-degree value. And innovation is value-driven, which you don’t get from obsolete technologies, such as monolithic and centralized data models, process optimization tools requiring tons of resources to run, DevOps with manual integration and deployment, private 5G networks, archaic virtual machine environments, and so on. 

Secure Tech Talent and Value Proposition 

Even though there are growing reports of layoffs coupled with the great resignation in the IT industry, digital talent is still costly and hard to come by, particularly for certain skill sets. 

There might be short-term possibilities to hire digital natives from businesses that have laid off employees (often startups). Informing your management that "Other companies secured great digital talent without costing them an arm and a leg, but we did not" will not be a good idea. 

However, in the long run, what is required is a logical pipeline for the sustainable recruitment and development of talent, created to guarantee that businesses have the right talent at the right time in the right place. The employee value proposition (EVP) must change in order to attract and keep digital talent, which has remained true ever since the pandemic forced an abrupt change in work models. 

Rethink IT Vendor Management and Partnerships 

Even in the most favorable economic environments, vendor negotiation is not a walk in the park. And economic headwinds and inflation make things even more difficult. Organizations must be meticulously careful while managing IT vendors to determine whether the renewal costs are proportional to the price hikes and consistent with current economic indicators. 

While controlling IT expenses will always be important, today's cut-throat digital strategy depends even more on certain technologies. For instance, end-user spending on public clouds is skyrocketing and becoming a more important part of the current workload design.   

However, moving to the cloud frequently comes with cost mistakes, and cloud expenditure after that can skyrocket. The same can happen in other types of outsourced projects as well, like mobile or web-based digital products. Choosing a reliable software or web application development company from the outset is hence, essential when managing IT partnerships. 

Proactively Experiment with Emerging Technologies 

Tech executives may be tempted to reduce investments in emerging technologies for budget constraints if the economic condition continues to deteriorate. Sure, a certain level of caution and investment reduction is required, but complete elimination would not be the right decision.   

This is because these funding and experiments help companies create non-replicable innovations and outperform their competitors through sustainable competitive differentiation. Although there are always new emerging trends to tinker with, Forrester sees growing and optimistic value in these fields. IT leaders should think about utilizing these technologies to find out the best digital bet: 

  • TurningBots that automatically write codes 

  • Edge intelligence based on customer data analytics  

  • Cloud-native computing with scalability and agility 

To Conclude 

Economic headwinds are intensifying, and signs are shifting downward. However, businesses are aware that investing in technology is still essential, despite or even as a result of this. Technology is the key enabler, allowing organizations to both increase the effectiveness of what they already have and to become more adaptable and resilient in highly unpredictable situations. Businesses should think twice and from a holistic point of view when making drastic cuts because there’s the risk of slipping too far behind to catch up and leaving an unwavering dent in their competitive landscape.