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March 29, 2010

CEOs shift focus to customer retention

But funding will come from IT cost savings, warns Gartner

By Vinod

A ‘recession-era mentality’ among CEOs means IT operations will need to make tight cost control a priority for the next five years, warned a Gartner report.

Overall, CEOs are more confident than a year ago, but they are remaining cautious with an eye to increasing efficiencies rather than building up to pre-recession spending levels. This confidence has revealed itself in shift away from cost cutting alone to finding ways to keep and enhance relationships with existing customers. The investments they are making to fund this are, however, are to come from cutting costs from IT operations.

“CEOs are maintaining tight cost control to deliver better margins and more cash to cope with the continuing economic turbulence,” said Mark Raskino, vice president and Gartner fellow in a statement.

Gartner identified a number of areas where CEO should focus their attention, all of which had a knock-on effect for the IT department.

First, CEOs will be finishing up the clean up operation they started in 2009: dumping under-performing assets, investing in initiatives that will improve their cost structure or drive revenue once the economy picks up. Financing for this will come partly from making internal cost savings, so CIOs should not expect a budget rise this year.

Their second focus should be on rebuilding customer trust, as the uncertain economic climate makes consumers reluctant to loosen the purse strings too much. From the CIO perspective, this translates into an increased interest in technologies that can build customer trust, for example, by making internal operations and financial structures more transparent. Business intelligence will be key to achieving this.

CEOs will be treading a treacherous path between planning to grow, perhaps through acquisition, and buffering themselves against the possibility of another economic crisis. CIOs can support this difficult process, by segmenting activities of the organisation, focusing one team on cost optimisation and another on the future.

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Finally, IT has a significant role to play in helping CEOs predict and navigate the post-recession world, by helping them understand customer intent, predicting the impact of various business conditions and linking them to strategy. This will require IT to become allergic to inefficiencies and drive investment into social networking, virtualisation and mobile devices.

 

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