Of Followers and Leaders

The signs of an economic slowdown—and specifically a cooling in many segments of electronic commerce—are everywhere. They all point to a moment of truth for IT and e-business managers. Not only are venture-backed dot-coms dropping like flies, but even some paragonsof the new economy are warning investors that growth is rapidly slowing. The latest was portal giant Yahoo Inc., which recently cautioned that it could experience lower quarter-to-quarter revenues soon. Meanwhile, news from the rest of the economy is not much better. A recent survey showed economists expect the U.S. economy will grow by just 2.6 percent this year, the slowest rate of growth in a decade. What a difference a few months make.

The dot-com nose-diving, coupled with somber macroeconomic news, will surely cause top managers at many enterprises to scrutinize their e-business strategies and IT investment budgets for this year. Any time major business climate changes take place, strategies—including IT strategies—should come under review. But we would strongly caution corporate leaders to resist overreacting to the current downturn by turning away from otherwise sound e-business strategies or the IT investments necessary to execute them. Historically, enterprises could get away with slashing IT budgets—and staff—at the first sign of an economic storm. When IT was largely a back-office function focused on efficiency and cost-cutting, customers and partners would not suffer if an enterprise delayed a project here or there.

Those days are gone for good, however. E-business means that the impact IT has on an enterprise is no longer confined to helping the back-office gears mesh more smoothly. It is now about allowing new business models—new sources of revenue—to thrive. E-business-critical systems such as eCRM, supply chain planning and e-procurement are also about reaching out to customers and partners faster and better. In a recent survey of e-business executives by Meta Groups Metricnet Monitor service, 72 percent said their enterprises are now “very dependent” on IT in accomplishing their goals.

Companies that take a contrarian path often emerge as winners. For example, Dell Computer got the jump on competitors by investing in processes and systems that made direct, online distribution possible at a time when the PC market was supposed to be dead due to razor-thin margins.

Similarly, enterprises with top managers who understand the importance of continuing to invest time and money to integrate e-commerce with their businesses will emerge from the current period of economic uncertainty as e-business leaders.