Best-Laid Plans For The Economic Slowdown

All signs point to a continuing economic slowdown. So while most 2008 IT budgets are larger than or the same as last year’s, that doesn’t mean CIOs are going to be able to spend them. Forty-one percent of 328 respondents to a recent CIO.com survey said their budget increased by an average of 14 percent, while only 10 percent said their budget decreased this year. Forty-nine percent said their budget stayed flat. But a budget is just a plan, not a fact. And plans change.

That’s especially true in times of economic uncertainty. According to our cover story, “Welcome (Back) to Hard Times,” by Senior Editor Kim Nash, optimism among CFOs has hit its lowest level since 2001. Nash cites a survey from Duke University and CFO magazine, which warns: “This pessimism will slow growth in earnings, capital spending and hiring.”

So what’s an IT executive to do? Nash offers both strategic advice and practical tips to help you successfully negotiate the uncertain road ahead—everything from how to shrink your project portfolio without making enemies to how to hang on to some of the savings to invest in new (albeit smaller) projects for growth.

One solution CIOs are increasingly open to is large deployments of Linux. In “An Enterprise Marches to Linux”, we look at how the Indian state of Tamil Nadu was able to meet escalating technology demand on a tight budget by aggressively pursuing an open-source strategy. Indeed, Nash writes, Gartner predicts that open-source use will expand between now and 2012 to conservative organizations motivated by cost and risk reduction. Being smart in the face of a possible downturn is not all about cutting costs. Discount retailer Family Dollar Stores is no stranger to tight margins, yet last year it began a major IT overhaul to support its “store of the future.”

Inevitably, however, many will shift away from investing for greater returns (using ROI as their key metric) to simply cutting costs (focusing more on total cost of ownership, or TCO). We recently asked visitors to CIO.com to compare 2007 and 2008 in this regard. For 2007, 68 percent said ROI was the most important factor driving their IT investments, while only 32 percent said TCO. For 2008, the ROI number dropped to 59 percent, while TCO climbed to 41 percent.

Clearly, both are important. Still, I’d hate to see us shift back to a singular focus on cost. Hunkering down is not going to get us where we need to go.