Mark McDonald

Yesterday, Gartner released the results of the their first quarter 2009 IT budget update survey.  The survey reported that IT budgets have declined a global weighted average of 4.7% since the end of 2008 with reductions present in all geographies and the majority of companies.  The reductions came in two waves.  First, the more than 900 respondents said that their IT budgets were 2.2% lower at the start of 2009 when compared to 2008.  The second wave, a reduction of 2.6% occurred in the first quarter 2009 as just under half of CIOs revised their plans.

The value of that information is in giving CIOs insight into what was going on and how to respond effectively to changes in the macro economic environment.

First, while IT budgets have taken a hit in the Global Financial Crisis (GFC), they have not fallen as much as other economic indicators.  So while times are tough, they could be tougher.

CIOs report that IT is busier than ever for several reasons: the increased competition for customers and revenues, the increased growth in transaction volumes, and frankly the reduced IT resources as there have been workforce reductions at many organizations.  This is requiring CIOs to “work smarter” rather than working harder or just doing more with less.

CEOs should be leveraging IT more than ever to gain the speed to remain competitive and the scale to raise operational efficiency.  This is particularly the case where companies have reported higher profits on lower revenues in the first quarter 2009.  Sustaining those ‘cost cutting’ earnings will require more than continuing to squeeze concessions out of the workforce and suppliers.  Sustaining efficiencies requires the standardization, centralization and management that are provided by IT.

Suggestions for CIOs:

• BE DECISVE in setting priorities on actions that raise enterprise effectiveness like, business process, business intelligence/visibility and workforce effectiveness.   Because you do not have the time, resources, or customer opportunities to do things twice, or things that do not matter.

• DO THE FIRST THINGS FAST as changing economic conditions render a large project irrelevant.  Other priorities can wait and CIOs need to place greater emphasis on the schedule (When) rather than priorities (Why).  An environment of volatility and uncertainty make schedule priority more important than business priority.

• BE RESOURCEFUL in restructuring IT to raise its productivity, because the business will not reduce their demand for IT just because you have fewer resources.  This requires you to restructure IT in order to raise its throughput, flexibility and responsiveness.

• MODERNIZE the technical infrastructure as new technologies offer lower cost, use less energy, deliver better performance, and provide greater capacity – the business will need all three in the immediate future.  Capacity, Cost and Control are major issues in an environment of growing volume but declining revenues.  Leverage your infrastructure to support this at speed and scale.

• PREPARE as economic recovery will probably not start in time to influence your 2010 budgets and plans.  The tendency will be to say that next year will be like last year leading to even tighter budgets.  Connect your resources with changes in company cash flow, customer retention, sales and capital efficiency.  If all you present is IT costs, then the only thing your boss can do is tell you that you cost too much.

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Category: 2010 CIO Economy Strategy     Tags: 2010 planning, IT budgets, IT management

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