CIOs forced into rapid cost cutting

IT budgets for 2009 have taken a turn for the worse in recent months.

A global survey of 900 CIOs conducted over March and April by research group Gartner found that the average IT budget for the year will now be 4.7% lower than in 2008. That represents a rapid reassessment of budgets which, as recently as December, had been pegged at 0% by roughly the same group of CIOs.

Over 40% of the sample of IT leaders said they have been forced to respond to business pressure since the end of last year with budget cuts; 54% have seen their funding hold steady; and an enviable 4% have actually seen a budget elevated over the first few months of this year.

But those that have had to wield the axe have had to make deep cuts. The average reduction among that group was 7.2%, with a several broad areas targeted.

CIOs reported that renegotiating contracts with suppliers and headcount reduction  (both staff and contactors) were the primary focus areas. But there was a distinct move towards shifting more work in-house and the delay of capital expenditure on IT equipment so that IT project investment could continue, Gartner said.

Related to that, only 9% of the sample said they were looking to outsourcing as a means of fulfilling their cost-cutting goals, said Dave Aron, an analyst with Gartner’s CIO advisory programme. “It is not seen as a panacea to cost reduction.”

Geographically, there were not too many differences among those implementing cuts. CIOs in EMEA reported an average drop of 5%; in the US, they were coping with 5.3%. Only in Latin America was there evidence of solid growth, with CIOs reporting a 4% rise in budgets.

Healthcare was one of the few sectors reporting a positive increase, at 2.2%, with CIOs in other industries all talking about decline: budgets in professional services, telecoms, high-tech (-10%); manufacturing (-8%) and utilities and financial services (-4%).

Many feel there may be more surgery to come: only 44% are confident that they will not need to tap into their contingency plans during the rest of the year in order to adjust their budgets again. But while 2010 budgets will be essentially flat, IT can expect the green light on spending growth to appear as 2010/11 turns.

David Cliff

David Cliff is managing director of Houghton le Spring-based Gedanken, a company specialising in coaching-based support and personal development. Cliff is an experienced trainer, manager and therapist,...

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