Businesses Rewrite 2020 Budgets and Plans Amid COVID-19

The coronavirus/COVID-19 pandemic has changed everything. Many workers are furloughed while others work from home. Streets and grocery shelves are empty. In the c-suite, organizations are shifting budgets and priorities in the wake of vastly different economic conditions than they'd planned for as 2020 began.

What are those executives talking about in their virtual board rooms as they adjust expectations and plans for 2020? About a month after the lockdowns began, we are beginning to get a picture of what actions executives have taken or are likely to take going forward to keep their organizations running and prepare for a return to more normal operations.

One of the windows into the conversations happening in the crisis c-suite comes from Dresner Advisory Services, which is currently working on its 2020 User Survey, so it included some questions about the impacts of the COVID-19 crisis in its survey of business leaders. The majority of respondents, 61%, said that the pandemic has impacted budgets and projects. Keep in mind, the question was asked before March 24, when Dresner Advisory Services published the results in this blog post. Those numbers varied a bit by region with 72% in Europe, the Middle East, and Asia, reporting an impact; 66% in North America reporting one; and 62% in Asia Pacific reporting one.

"Asia Pacific -- which enacted the most stringent containment policies and conducted the most testing to date -- reports the lowest level of impact, even though it was the geography most affected at first by COVID-19," the staff writes in the post. "Across all regions, the distribution of responses seems to align to the spread and shifts in regional severity of COVID-19."

Dresner Advisory Services also broke down the responses by roles. Of those in operations (including manufacturing, supply chain, and services), 89% reported an impact to projects or budgets. Those numbers were 83% for executive management, 75% for marketing, 65% for finance, 60% for IT, 60% for research and development, and 56% for business intelligence.

In terms of industries, Technology (59%) and Financial Services (53%) reported the least impact. Education and higher education (93%), Consulting (88%), Advertising (83%), and Healthcare providers (78%) reported the biggest impacts.

Meanwhile, a Gartner survey of 317 CFOs and finance leaders on March 30 revealed that 62% are planning some cuts to selling, general, and administrative budgets in their organizations this year. While 38% said they don't anticipate any cuts this year, 18% are planning to cut budgets in every category by at least 10%, and marketing departments are the leading function to have their budgets cut by 10% or more.

But treating every department the same could be a mistake, according to Dennis Gannon, advisory VP for the Gartner Finance Practice.

"Across-the-board cuts to every category of SG&A spend often turn out to be short-sighted," he said. "For example, we see evidence that the coronavirus has prompted a permanent shift to more homeworking. This transition to large-scale remote working puts additional strain on the IT department. Therefore, forcing the IT infrastructure group to bear the same cost reductions as another functional area could expose your organization to new risks or negatively affect business continuity." 

Rather than headcount reductions or across-the-board cuts, Gartner advises organizations to consolidate products and services into fewer lines of business, building on the foundation of a narrower industry footprint.

"Where there is excess scope in their organization's product or service portfolios, the hidden costs of complexity drag down profitability," Gannon said. "The best CFOs will use COVID-19 as the catalyst to derive significant operating leverage from their most profitable lines of business without destroying value."

For more on IT in 2020, read:

15 Best Places to Work in Technology 2020

10 Enterprise IT Transformation Trends to Watch for 2020

IT Salary Report 2020: Get Paid What You Are Worth

5 Key Trends Enterprises Must Address in 2020