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The R word

The R word

Whether or not an economic downturn is here or on its way, now is the time to prepare for one.

Merrill Lynch says we're already in a recession. Is that relevant? Morgan Stanley and Goldman Sachs say a US recession this year is now unavoidable. Is that relevant?

Here's what's relevant: Whether they're right or not, you need a plan. And you need to start working on it right now.

Last Monday, Merrill Lynch's chief North American economist, David Rosenberg, issued a research note to clients saying a recession has already arrived. Rosenberg cited rising unemployment and energy costs, a collapsing housing market and dwindling consumer confidence -- the usual suspects.

Meanwhile, Morgan Stanley economists Richard Berner and David Greenlaw issued their own research note last week, predicting a mild recession in the first half of 2008. And Goldman Sachs economist Jan Hatzius predicted late last year that a recession in the US was on the way.

Pretty scary, huh?

First, let's get the word out of the way. Recession. Recession. Recession. Feel better? Feel worse? Who cares? The economic facts on the ground remain the same, no matter what label is slapped on them by any economist, politician or pundit.

Recession or not? That's irrelevant to you. You need a plan based on facts, not frightening words. Start collecting them.

  • Know your CEO. Does your CEO trust you enough to be candid? If so, talk to him. Otherwise, do some research. How has this executive reacted in the past to a tighter business environment -- by shrinking or by attacking competitors?
  • Know your business. Real estate is getting ugly, but discount retail may benefit. Some banks are overextended; others see opportunity. Merrill Lynch's Rosenberg predicts consumer discretionary spending, financials and (gulp) tech will be pummeled badly; telecom, health care and utilities have the least downside risk. How hard will your company's customers be hit?
  • Know your supply chain. Who's solid? Who's shaky? Who's likely to cut back on the ability to work with your IT initiatives? And downstream, which big customers are likely to make demands on your IT capabilities?
  • Know your IT shop. You have a portfolio of projects. Which ones are bogged down? Which have lost meaningful support from their business sponsors? Where will you redeploy those analysts and developers?

You have a collection of technologies. What fits your future plans? What doesn't but will cost more to replace than you want to spend right now? What will you need to add if your company swallows a competitor or launches a market-share grab?

You have a staff of IT professionals. When push comes to shove, you want to maximize the value of those assets, not just cut head count. How will you keep the people you need? How will you find the new expertise you'll require?

But wait, you might be thinking -- is there a recession going on? And if there's not, why ask all these questions and build a plan now?

Because right now nobody's pounding on your door. Because it's not a crisis -- yet.

Look, usually the times you ask these questions are in the middle of a crisis (or during budgeting, which is just a crisis that's scheduled annually).

But you're not in crisis mode now. With no one breathing down your neck, you can collect more than just the bare facts. You can ask your people more questions and get better answers. You can revisit decisions and second-guess your own analysis. You can research and consult and back up.

This is the time you'll wish you had when the crisis hits.

Use it wisely. Make the plan for your IT shop based on what's relevant to you.

That's the R word that matters.


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