Increasing uncertainties about the global economic and financial situation, including worries about the sovereign debt in Europe, and the tightening government budgets are likely to trigger short-term reactions to reduce IT and other spending in government.
Of course almost everybody knows that IT investments are key to reduce costs elsewhere, by increasing automation, reducing duplication, improving transparency and oversight. However government IT organizations are not always at ease when it comes to asking for more money (or a proportionally lower budget cut) during tough times.
Project failures, budget overruns, duplication of infrastructure and applications, incoherent relation with IT suppliers, and more, have seriously undermined the credibility of a few government IT organization and contributed to reduce trust in many others, despite the excellent job they have been doing. Journalists, political commentators, application developers, bloggers add to the mix by mentioning examples of excessive or unsuccessful IT spending in the public sector (often forgetting that the main difference between public and private sector rate of success in adopting IT is that any failure for the former is by definition in the public domain).
As a consequence I expect to see more calls for tightening IT budgets. I’ve been through this already in 2008 and 2009, when state government in the US had to deal with budget shortfalls, and even earlier, with efficiency reviews in the UK or in Australia. In those cases, most of the conversations were about how to reduce IT spending in the short run – by renegotiating contracts with vendors, by delaying technology refresh and projects that were already in the pipeline, by reducing maintenance costs, and so forth. Only in a minority of cases the conversation was about how to spend better – and even more – on IT, in order to realize savings in the business.
I am not expecting anything different this time. The first reaction by federal, state and national agencies in the many countries planning draconian debt and budget reductions will be to cut proportionally across all “administrative and support services”, IT being one.
Unfortunately, for some organizations this happens after they have come almost close to squeezing the last drop of discretionary spending from their IT budgets. Short or medium term IT cost cutting measures may actually turn out to be worse than the disease they are trying to cure.
And while much-heralded centralization and consolidation initiatives promoted by central government agencies promise to achieve unprecedented levels of IT frugality, they are both difficult to implement and, by going too far, risk depriving agencies of the agility they need to face uncertain times and rapidly changing priorities.
What is different from previous downturns, in fact, is the great level of uncertainty about whether and when the good times will come back. Whereas in the past budget constraints were fueled by lower tax collection due to slowing and recessive economies, the problem now is to reduce incredibly high levels of debt, in a context where the economy grows – at best – very very slowly. Nobody can predict how long this will last, so short-term decisions based on the assumption that what we undo or do not do today will be possible tomorrow may be very myopic.
The new challenge that the current environment is posing is how to make choice that are affordable AND sustainable at the same time. As I wrote in a recent post, this is not something that people are prepared or willing to deal with, but is the reality the vast majority of government organizations will face.
Those who will be able to balance what is affordable today with what is required to sustain services and operations tomorrow will emerge stronger from these dire times. Those who just look in the rearview mirror at best practices to cut costs from the recent past, may not.