November 10, 2009, 6:40 PM — In past recessions, IT budget-cut demands handed down to CIOs were deep -- and indiscriminate.
"The attitude was, 'Let's cut, cut, cut, I don't care,'" said Jerry Luftman, a professor of information systems at Stevens Institute of Technology in Hoboken, N.J.
With this recession, IT budgets have been trimmed to be sure, but there has also been "a lot of concern with how IT can be leveraged to reduce the cost of business," said Luftman, who analyzed a survey released Monday by the Society for Information Management (SIM). The results were released during this week's SIMposium 09 conference, which was held in Seattle and drew more than 400 CIOs. The Chicago-based group counts 4,000 CIOs and other senior IT leaders as members.
According to this year's survey of 243 SIM members, "IT cost reduction" ranked fifth in their list of management concerns. Topping the list was "business productivity and cost reduction," followed by "IT and business alignment."
As proof that businesses have been willing to invest in IT to save or make more money, the most popular areas of investment this year are business intelligence, server virtualization and ERP (enterprise resource planning).
Investing in the latter two can help companies quickly save money, Luftman said.
BI is a different beast. Analytics can help a company boost its top line. But even though companies are "struggling" with longer-than-expected rollouts, they haven't given up.
"Because there's a lot of promise, BI hasn't been pushed to the wayside," Luftman said.
Overall, the recession has pinched CIO wallets. Fifty-two percent reported that their 2009 budgets were smaller than the prior year's. However, the percentage of CIOs who are expecting their 2010 budgets to be smaller than 2009 shrinks to 28%.
That hasn't changed their attitudes in one key area.
"Companies are not hiring next year because they worry about what it will cost them from a health-care benefits perspective," he said.
Instead, CIOs are turning to outsourcing. It is expected to comprise 15% of IT budgets in 2010, versus 12% in 2010. Offshoring of internal employees is also growing fast, expected to take up 6% of budgets in 2010 compared with 4% this year.
Infrastructure spending remains weak, and is expected to fall to 31% next year from 33% now.
"Now is not the time to be a vendor," he said.
IT budgets this year comprised an average of 3.83% of their company's revenue, which is up slightly from 3.63% from 2005 to 2008. Twenty-two percent of unlucky CIOs reported their IT budgets comprised 1% or less of their corporate revenues. A lucky 42% reported their budgets comprised 5% or more of revenue.
Another notable data point: The average CIO tenure continues to grow, hitting 4.6 years in 2009. That's up from 3.6 years just three years ago.
