Investing for growth in difficult times

The global economy is more challenging than ever, and companies are downsizing and scaling back their expenditures to ride out the storm. Yet with today's communications solutions allowing companies and employees to operate more efficiently, forward-looking companies are rationalizing their infrastructure and investing in new technologies to help them do more with less. Dave Quane, Regional CIO for EMEA and Asia, Nortel explains how smart investments now can help companies survive and thrive in difficult times.

The rapid and significant change in global economic conditions has created a new imperative for business managers to cut costs while maximizing staff and business efficiency. Yet companies that can look forward during difficult times will find that it is an excellent time to invest for growth, with significant productivity and efficiency dividends available to companies that make the right technology investments.

Getting Inertia Budget Fight to Virtual
All over the world, companies in every industry are being forced to do more with less. Industry analysts have recently revised their spending estimates downward, with consensus that corporate IT expenditure will be basically the same in 2009 as in 2008. Compared with a typical growth of around 5 percent or more, this investment decline confirms just how much the financial crisis has affected business confidence in IT.

When IT budgets go flat, the tendency in many companies is to go into maintenance mode - keeping systems and applications running, but putting off major investments for times that aren't so pressured. Yet while it may seem counterintuitive, investing in appropriate technologies can deliver even more benefits than simply cutting costs and trying to weather the storm.

Adversity also brings new opportunities - but it also forces managers to make what may seem like unconventional investment decisions. Because the desire to cut short-term expenditures in difficult times invariably leads to cuts across the board, investing for growth remains a difficult concept in many companies, particularly since IT budgets have historically been amongst the first to be cut in difficult times.

Success in today's climate will only come by discarding conventional wisdom and investing intelligently for the future. For example, server virtualization, which has grown steadily in popularity in recent years, has become a focal point for investment during the current tough economic times. Gartner* estimates that investment in virtualization solutions will grow by 43 percent during 2009 even as analyst consensus predicts that overall IT budgets will remain virtually stagnant.

Because it allows companies to do more with less, virtualization is the first stop for IT investment in cost-conscious companies. Even companies that are not using virtualization are finding themselves drawn to it, if only because their competitors are probably using it - and deriving competitive advantage from it.

No matter how large or small the company, virtualization can pay off big. Nortel, for one, has rationalized its IT infrastructure. Technical experts worked hard to evaluate our internal applications and used server virtualization to reduce the number of physical servers in use. In our virtualization efforts, using 245 virtual servers sourced by only 23 physical servers has resulted in hardware spend avoidance of close to US$750,000 and a projected energy savings of US$107,000 per year. Virtualization has helped Nortel to reduce energy consumption, improve system utilization to peaks of up to 80% and reduce costs.

Nortel's goals are clear: to slash the cost of day-to-day operations and decrease its IT-related environmental footprint, while empowering employees with new communications technologies like virtual presence and unified communications that will make them more productive than ever. Such solutions are good business in any time, but in the midst of global financial turmoil they can become an invaluable tool for survival.

Communicate Better, Grow Better
Server virtualization may help companies' back-end data centers operate more efficiently, but when it comes to employee productivity the best area for investment lies in network infrastructure and networked communications solutions.

Unified Communications, which breaks down the barriers between email, voice, video, instant messaging, presence and other forms of communication, can provide significant productivity benefits by allowing people to collaborate better no matter whether they're in the office, at home, or on the road. Easier collaboration means work can get completed more quickly and efficiently - which helps businesses perform faster and more efficiently than ever.

"We expect to see productivity increase, especially for our journalists, by as much as 20 percent by using integrated communication tools from Nortel and Microsoft," says Hansjoerg Grolimund, project leader and head of collaboration and communication at Ringier AG, Switzerland's largest publishing house, which recently implemented the unified communications solution resulting from the Nortel-Microsoft Innovative Communications Alliance.

"As market leaders, Nortel and Microsoft offered a complete, one-stop shop solution as well as the services and support we sought," Grolimund continues. "The one-click desktop access for video, VoIP, presence and instant messaging provides real value to editors and journalists who can work more efficiently from anywhere and keep in touch with critical resources at all times."

Other modes of communication are equally valuable. Manufacturing concern Hulunbeier New Gold Chemical Company , for example, improved communications among its employees with one-click access to VoIP multimedia conferencing, email, instant messaging and presence-based applications as well as campus administrative systems such as intra-guard communication and security systems. Nortel's standards-based unified communications solution has delivered all these capabilities - resulting in dramatically lower costs for Hulunbeier while cutting energy consumption by up to 40 percent over competing solutions.
By providing easy access to videoconferencing, unified communications can bring together staff and customers in entirely new ways - dramatically boosting revenues with a very low incremental cost. Indian IT services firm Wipro Technologies recently won the Network World Asia IT All Stars Award 2008 for an innovative use of Nortel's Unified Communications solution, developing a video conference based approach to facilitate Wipro's recruitment of more than 20,000 new employees from across India every year.

Using video instead of phone calls provides a richer interview experience, while deferring expensive travel saves employees time and money as well as reducing the company's environmental footprint. By Nortel's calculations, a company spending as much as US$23 million annually on travel can use Telepresence and other video conferencing solutions to recover as many as 385,000 hours of lost productivity, reduce its carbon footprint by up to 4,200 tons and save up to US$7 million.

Counting the Benefits
Within the current era of Hyperconnectivity - in which everything that can be connected to the network, is connected - instant, multi-modal communications are taken for granted. If companies are providing anything less, they risk obstructing their employees' smooth communication and keeping everyday costs much higher than they need be. In a normal business environment, this approach would simply keep costs high by perpetuating inefficiencies in existing technologies. Given the challenges of the current global downturn, however, failing to address these inefficiencies is simply courting disaster.

Across Asia, telecommunications carriers also recognize this and are upgrading their networks to do their part. Nortel's Carrier Ethernet and 40G optical solutions are already being implemented in several countries, providing unprecedented bandwidth to support the increased demands of Hyperconnectivity and to open up new paths for customer innovation. Carriers will fuel this innovation by supporting communications-enabled business processes (CEBP) that bring all forms of communications directly into the heart of the customer's network. The global business outlook may seem cloudy now, but as those clouds gradually separate, the sun will reveal a business environment that has changed dramatically. Many large companies will struggle to survive because they rely on outdated systems that fail to empower their employees. Conversely, small companies will find themselves at a competitive advantage if they can invest in smart solutions that empower employees to think, work and collaborate in new ways. Making smart investments now will help companies ensure they are in the latter group, exiting the downturn sleeker, faster and smarter than ever.