By Jill Gambon

Mar. 2, 2009—With economic uncertainty stretching well into 2009, businesses around the globe are retrenching to ride out the downturn. Lean times demand tighter budgets, and that includes cutting back on technology spending. But businesses that cut too much—or trim the wrong things—run the risk of stifling innovation and hampering their profitability and competitiveness for years to come, according to technology management consultants and economic experts.

Casting a look back at previous recessionary cycles, there are lessons to be learned from companies that continued to invest in technology even while the economy slumped. An October 2008 report by Diamond Management & Technology Consultants studied the performance of more than 400 publicly traded companies with revenues of at least $100 million before, during and after the last recession, which was defined as occurring from 1998 to 2004. Various financial indicators, including return on equity and return on invested capital, were used to measure performance. Each company's investment and expenditure patterns were analyzed as well.



The report's central finding: While most companies reduced spending during the recession, the superior performers avoided the temptation to make across-the-board cutbacks. Instead, they dug deeply into their operational data and analyzed that information to determine where and how they could become more efficient. They made choices regarding which strategies to pursue and what resources, including technologies, they needed to meet their goals and achieve growth. Those choices had a direct impact on the bottom line. The research showed that the top performers created more than $350 billion in market value, while those companies whose performance weakened lost more than $200 billion.