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How CIOs Are Dealing With A Tough Economy

Plan A: no new hires, hold off on infrastructure upgrades; Plan B: an IT inventory to target discretionary projects.

Times are tough, and IT budgets are feeling the pressure. Just don't expect CIOs to run away scared.

The last three months have been particularly stressful, our just-completed InformationWeek survey about IT spending finds. Of more than 600 business technology executives who responded to our most recent survey, 40% say they decreased IT spending this past quarter relative to their original 2008 budgets; for companies with annual revenue of more than $500 million, it's 50%.

Still, there are plenty of business technology executives going forward with big projects, even adding to their IT workloads--and budgets--with new projects, backed by managements that see a chance to invest in technology-driven efforts to leap ahead of weakened competitors. CIOs are protecting customer-facing projects--they're about half as likely to be cut as ones that don't touch customers. Not only that, smart CIOs are looking for ways to use the IT tools at their disposal to cut costs in their organizations and in other parts of their companies.

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These are difficult times, no doubt. Any chief worth his or her BlackBerry is putting together the Plan B list--the projects/efforts/areas that can be deferred or eliminated if things get worse. Now's the time to take inventory: Where exactly is the IT budget being spent, which projects are critical, which have tactical short-term benefits, and which can be put on hold?

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Here's how these penny-pinching trade-offs can play out. Principal Financial is slowing infrastructure upgrades but plowing ahead on collaboration technologies. At manufacturer R.R. Keller & Associates, cost-saving voice over IP is a go, but a more strategic 3-D design system may wait. A retailer says yes to in-store kiosks, but no to IT "process improvements" such as data cleansing and server consolidation. A major manufacturer might delay an ERP system consolidation.

General Motors CIO Ralph Szygenda declines to discuss any specific IT spending changes at GM, where the company's facing a multibillion-dollar cost-cutting campaign amid slumping SUV and truck sales and dramatic steps to conserve cash, but he says new application development and deployment "will be maintained as much as possible." In the economy overall, he expects business IT spending to decline, with "key tactical projects" and those in emerging markets staying on track. "Executives do not want to cut key business transformation projects," Szygenda says via e-mail, "but scrutiny is increasing."

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