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CIOs Trim Spending, Staffing

Beset by challenging economic conditions, one in four CIOs is facing budget and staffing cuts, according to new research from CIO.

The survey of nearly 200 IT executives found that 26 percent plan to decrease their IT budget in the next 12 months, while another 26 percent will put spending on hold. One-quarter say they will cut staffing budgets for other contractors or temporary workers, and 21 percent plan to reduce full-time in-house staff.

Many CIOs are taking a "wait and see" perspective, says Mark Cummuta, president and founder of Triumph CIO Group and a CIO.com blogger. "They are being cautious but not negative."

CIOs are clearly battening down the hatches in response to the sputtering economy. But the mood was different last spring. Then, a CIO survey found IT executives unfazed by the prospect of an economic slowdown. At the time, only 17 percent planned to decrease their IT budget in the next 12 months; 20 percent said it would remain the same. Just 18 percent said they would decrease staffing budgets for other contractors or temporary workers, and 14 percent planned to reduce full-time in-house staff.

While she hasn't heard of widespread hiring or pay freezes across IT organizations, Gartner VP and certified compensation professional Lily Mok expects enterprises to take a conservative approach in budget planning and staffing for the rest of 2008 and into 2009. As the economy slows, companies may halt noncritical projects in the pipeline. For those that are mission-critical and under way, they would keep moving forward while closely monitoring industry and market movements. Mok says it takes time for corporations to analyze market conditions and take action.

Nearly a quarter of survey respondents said their primary investment focus is shifting from increasing efficiency to cutting costs. The top areas for trimming in the next 12 months are outsourced IT services (31 percent), computer hardware (25 percent) and telecommunications (19 percent). So IT departments should be ready to present specifics on ROI to business leaders, says Cummuta.

The survey also found that more small and midsize company respondents anticipate IT budget decreases in the coming year than three months ago. Twenty-seven percent of midsize companies anticipate IT budget cuts, compared with 15 percent in March. More large companies expect to put their IT budgets on hold (29 percent, compared with 22 percent for both small and midsize companies).

"There is more sensitivity to the economic downturn for the mid-market," says Mike Sullivan, VP of management information systems of GenTek, a $609 million manufacturing company. One reason, he says, is vendors often don't cater to the business needs of midsize companies. And these companies can't always meet their needs with a solution designed for smaller businesses, so they have to go big, which can mean more cost, he says.

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