Panic Mode: Are CIOs Being Pressured To Cut?

What's up with IT budgets? Has all the talk about recession put CEOs into panic mode and increased pressure on CIOs to cut costs? If so, what's on the chopping block?

John Soat, Contributor

January 29, 2008

3 Min Read

What's up with IT budgets? Has all the talk about recession put CEOs into panic mode and increased pressure on CIOs to cut costs? If so, what's on the chopping block?There's an interesting article on Advertising Age's Web site about the increased use of the word "recession" in The Wall Street Journal in the last few months and how such an increase in the past has correlated with the onset of a couple of earlier recessions, specifically those in 2001 and 1990-91.

"Recession" references surged in December and January to the highest level since early 2002 (just after the 2001 downturn's trough). This could foreshadow an official proclamation down the road that a recession began in late 2007 or early '08."

Does that make the recession a self-fulfilling prophecy -- or something wished on us by The Wall Street Journal? No, it just means people are worried about it, including (perhaps especially) corporate executives.

Of course, CEOs aren't the only ones in panic mode over the economy. An acquaintance who works as a financial analyst contacted me and wanted to talk about IT budgets. He said that tech stocks are down about 12% to 13% so far this year, mostly on worries about a significant drop-off in IT spending. Former Wall Street darling VMware is turning into the poster child for that kind of tech investor panic.

The outlook certainly wasn't this dire late last year. The most recent quantitative information I have about IT spending comes from a research survey InformationWeek did last fall. As part of our CIO Effectiveness Survey 2007 we asked respondents to comment on their companies' tech spending plans.

Of the 724 CIOs, CXOs, IT staffers, and line-of-business managers who participated in the survey, almost half (49%) said they expected their IT budgets to increase this year (2008), 28% expected them to stay the same, and 16% expected them to decrease (7% didn't know).

That matches up with the most recent survey by the Society for Information Management of its membership. SIM's survey was published last October and conducted last summer. Back then almost half (49%) of 130 CIOs and IT managers who responded to the survey predicted their IT budgets would be larger this year than last year, about a third (30%) said their budgets would stay the same, and only 21% said they'd have fewer IT dollars this year.

Unfortunately, 2007 is beginning to look like something of a high-water mark for IT budgets. In the SIM survey, 61% said their 2007 IT budgets were greater than their 2006 budgets, 17% said they were the same, and 22% said they got less last year than the year before.

So if IT budgets are being slashed, what's on the chopping block? New projects? Hardware upgrades? IT hires?

Technology workers are feeling the anxiety. According to a news story by my colleague Marianne Kolbasuk McGee, IT workers are more worried about their jobs than they have been for many years. At the same time, the demand for IT workers is still strong.

How's your IT budget looking these days? Are you getting pressure to cut costs? And if so, where?

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