Economic Recovery and the CIO

By Philip L. Swan

With the Department of Commerce report showing the economy grew an annualized 3.5 percent in the third quarter, it is clear that CIOs should prepare for the thaw and begin working on the role of IT in helping their companies manage risk and seize the growth opportunities which lie ahead. While the economy still contracted 2.3% over the same quarter last year, that's better than in the first half, an important change in the right direction.

The Worst Avoided

The litany of bad news that began with the U.S. housing meltdown has been sobering at best. We narrowly avoided a second great depression and instead have weathered a great worldwide recession.

The U.S. financial mess made the housing recession worse; export strength faded due to overall economic weakness. Tighter credit, job losses, lower asset prices and flat wages have hit consumer spending which further deflated economic activity.

What’s Ahead

The recovery is coming, sooner or later. Many predict it will be a softer recovery than we have been used to. Regardless of residual doom and gloom, let’s not lose sight of huge economic stimulus that has been directed at the IT market, much of it directly targeted at midsized companies.

The U.S. has committed:

• $41 billion in IT-related economic stimulus; $22 billion for e-health initiatives
• $11 billion for smart grid activities
• $7.4 billion for broadband
• $20 million for IT systems in lending to small and midsize businesses

Moreover, Canada has committed $3 billion for IT investment, including $1.7 billion for small to midsize enterprises. Around the world, other countries have also committed varying amounts of fiscal stimulus, much of it related to IT. Not insignificantly, China has committed $55 billion to technology development.

CIOs Creating Value

So what does that mean for the CIO at a midsized company? Richard Hunter, group vice president and Gartner fellow and George Westerman, research scientist at MIT Sloan’s School of Management’s Center for Information Systems Research, recently spoke at Gartner Symposium/ITxpo to highlight key findings from their new book, "The Real Business of IT: How CIOs Create and Communicate Value."

"If the economic meltdown of 2008 shows us anything, it’s that you can’t talk about return without talking about risk," said Mr. Hunter. "Over five years of joint research have shown us three things: firstly, companies that communicate effectively about IT value create more value; secondly, companies that communicate effectively about IT risk reduce enterprise risks; and thirdly, CIOs who communicate about risk and return in terms of business outcomes and performance find it easier to achieve an effective balance."

Lessons Learned Well

Hopefully we have learned that risk and reward should never be disassociated. As the waves of economic stimulus flow through company coffers and growth resumes, the lessons will likely begin to fade. IT has a vital role in associating risk with desired business outcomes to ensure sustained access to innovation and productivity gains ahead.