by Kim S. Nash

IT Slashes Budgets, Starts Layoffs: Exclusive CIO Survey

Oct 31, 20083 mins

How much has IT budget anxiety grown? Forty percent of CIOs plan to cut their budgets from last year's level, with contractors and discretionary technology projects first in line for cuts: that's up from 26 percent in July and 17 percent in March.

As the U.S. economy melts down, so are technology budgets and staff counts.

Forty percent of CIOs plan to cut their budgets from last year’s level, with contractors and discretionary technology projects two of the first items to get the knife, according to CIO’s exclusive survey of 243 technology leaders in October. Another 34 percent have jammed on the brakes, planning to keep budgets the same as they were 12 months ago.

The road to cost cutting has been clear, as documented in a series of CIO magazine studies conducted in March, July and October. On budgets, for example, 17 percent said in March that they would make cuts in the coming year. In July, that percentage jumped to 26 percent, then leapt to this month’s 40 percent figure.

For more detail on what CIOs had to say on budgets and related matters such as financing and contingency plans, see our related story on the survey results.

“Until September, we thought the economy would recover in the back half of 2009. Now, not a prayer,” says Rick Belmonte, CIO at Lowe Enterprises, a real estate development firm. Belmonte has deferred all new technology development projects until 2010, including a Hyperion forecasting application and an Oracle project management system. He also cut outside consultants as well as 20 percent of his full-time staff, now down to 60 to 65 people.

“I might lose more people I don’t want to lose because good people want to do new projects, not just maintain older systems,” he says.

Seventy-two percent of IT leaders in our survey have postponed or will postpone discretionary projects. Of the 51 percent who had a financial contingency plan in place, 35 percent have already launched it and another 17percent plan to do so within six months.

Conseco, a $4.6 billion insurance company, has pushed a few projects planned for 2008 to 2009, says EVP and CIO Russ Bostick. But despite losing $180 million in 2007, Conseco hasn’t cancelled any projects underway, he says.

James Sutter, senior partner at IT management firm The Peer Consulting Group, says emergency measures are par for the course. Sutter, a former technology executive at Rockwell and Xerox, notes: “A financial crisis will wash out initiatives that really don’t stand the needs test.” It will also wash away jobs.

Jobs are frozen at many companies, with 46 percent of survey respondents already letting open positions go unfilled. Another 13 percent plan to invoke that option in the coming months.

The big worry, with good reason, is layoffs. Most respondents, 66 percent, said they have no plans to shrink headcount. However, others have already started. Twenty-three percent of respondents have reduced staff in the last six months; another 11 percent plan to in the next six months.

At Lowe Enterprises, layoffs have been “very difficult for us,” says CIO Belmonte. “We let people go who had been here a long time.” Another round, he says, is possible.

In related news, American Express this week announced it will slash 7000 jobs (approximately 10 percent of its global staff,) mostly in the management ranks. The credit card giant will also put a freeze on new hires and management salaries and trim spending in technology, marketing and business development