The realities of the global credit crunch are taking their toll. At a minimum, many companies will not experience much growth in the months ahead, and some are seeing their revenues shrink. Concerns about the severity and duration of a downturn are raising questions about IT spending. After all, IT is a major component of most budgets and makes an easy target in the inevitable sweep of corporate cost cutting.

But before you get out that red pencil, remember the old saw that no company ever shrank its way to greatness. IT is such an important enabler of efficiency, business change, and growth, that cuts must be carefully—almost surgically—considered. Keep in mind that times of chaos and challenge can also be times of opportunity. In fact, smart businesses are known to grow in hard times. They take advantage of their competitors' fears (and the "shrinking mentality" that results) to boldly grab competitors' customers with new ideas and initiatives. [Jim Champy wrote about such companies in his book "Outsmart!," discussed in ON No. 1, 2008. -Ed.]

Taking an optimistic view of what's possible rather than focusing on the dark spectrum of retrenchment, here's some advice on how to manage IT to support business performance during hard times.

Throw out the IT budget

OK, I don't mean you should jettison your sense of financial discipline. Many companies have no choice but to reduce costs during hard times. But cost cutting can distort a company's resources in perverse ways. For example, budgets sometimes act as entitlements; a typical approach to cost savings is to ask everyone to share in a fixed percentage of reduced spending. Avoid the easy temptation to share the pain equally and take the harder route, asking what the future of the business really needs from IT and what you can afford to stop doing.

Too often, IT budget actions gut the new initiatives—development projects and capital investments in new technologies—that a company needs to support business in the future. In the meantime, spending on old, costly infrastructures continues. I'm often struck by how a company with billions of dollars in annual revenues can't find a few million to spend on what's really needed from IT. Starting with a clean budget spreadsheet, the opportunity today is to think hard about IT spending and make tough choices about where future returns will come from.

Can spending more on IT improve the efficiency and performance of the business?

This is a dangerous question to ask because the answer is almost always yes, but it implies a risk. Technology, applied intelligently, can improve operations efficiency and deliver major expense relief in areas such as customer service, logistics, and manufacturing. But when money is tight, management will expect to see quick results. You had better be sure you can execute on the technology and business process changes required to generate the planned efficiencies. Otherwise, spending more money in hard times can be a career-ending move.

Can IT help grow the top line?

This may be the most important question to ask. Keeping a company strong requires growing revenues. Conversely, the cost of shrinking a company can be felt for many years, especially if it undermines the company's competitive capabilities.

Can IT help you reach new customers in current or new markets?

Remember the world is truly flat, and there are billions of new customers out there. Can IT help expand what your customers spend with you? This may require a superior product or service or just being more price competitive. In hard times, customers will also be shopping around for a better deal. It's a chance to own more of the market if you can perform.

Can IT help you create new products or services?

When I look at companies like Shutterfly, Sonicbids, and Partsearch, I see products and services that would not exist without information technology. What products or services could you invent—or reinvent—that technology now enables?

And as you manage through hard times, continue to ask how IT can help you maintain your company's unique capabilities. Remember, the strongest companies will survive and become even stronger, and, as in all economic cycles, hard times will come to an end.