Editor’s Letter: IT spending crunch?

Such is the economic volatility that not even the professional market watchers are willing to put any hard numbers on projected average spending growth/ decline, even when they are armed with feedback from thousands of CIOs.

In its annual customer survey in September, Gartner asked 400 CIOs at companies whose buying power amounts to $60 billion about where their 2008 spending would end up: 3.2% growth was the declared global average, down from the 5.8% predicted earlier in the year.

But what a difference a month of financial turbulence can make. The dramatic events in October – and the stream of bad economic news since – were enough to send Gartner back to its pollsters in recent weeks to retake the pulse. It even increased the sample to 800 (a group with spending power of $100 billion) to ensure the numbers were highly representative.

The news was not good: companies declared that they had torn up the 2009 budget plans they had created only a few weeks earlier. In their place were plans for zero or minimal growth, up to a maximum of 2.3%. However, if the Western economies were hit hard by recession, then a worse-case scenario of a 2.5% budget fall would ensue.

Given that these numbers include lots of companies in emerging economies, where budgets will certainly show growth, the only conclusion for countries such as the UK is that IT budgets are going to be in sharp decline in 2009.

How IT decision-makers and the industry will respond to business pressures to cut IT costs is the main theme of our cover story this month. Everyone we talked to (and most did not want to be quoted by name for obvious reasons) agreed that they will have to take costs – and people – out of the IT equation. But there is also the sentiment that in contrast to previous recessions, the task of knowing where to cut is extremely difficult. IT is now embedded in all business processes and intrinsic to many multi-year business transformation programmes. And any clumsy or illconceived surgery there may prove fatal for the patient. And that is perhaps why Gartner – and its interviewees – are having a harder time than in previous recessions in pinning down areas where they can squeeze out costs.

Gartner has some immediate advice for IT executives: Turn your management team into a cost-optimisation team and start thinking like a CFO, seeking out areas of inefficiency as well as technologies that will support cost reduction: virtualisation, VoIP, software asset management, email and security managed services, SaaS, data centre hosting and others.

But as the former CFO for IT at Deutsche Bank highlights in our article, any executive (on either the IT or business side) who focuses solely on taking cost out of IT while ignoring the requirement for innovation and competitiveness will end up working for an organisation that emerges blinking, ill-equipped and weaker into the post-recession world.

Further reading

Crunch time for the IT industry
How the economic recession will reshape the IT business – and force some game-changing investment choices

IT jobs and the crunch: Stealing from tomorrow
Knee-jerk reactions to the recession may impair the availability of IT skills in the future

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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