IT budgets flat in 2009, says CIO survey

News Analysis

IT budgets flat in 2009, says CIO survey

Warwick Ashford

CIOs do not expect IT budget cuts to be as extreme as has been predicted.Research by Gartner shows budgets will largely remain flat, with an average increase of 0.16%.

More than 1,500 CIOs around the world responded to questions about business priorities, strategies, technologies and budgets, including 114 in the UK.

Organisations are reluctant to make big cuts to IT because they see IT as a way of alleviating economic woes. This can be achieved by increasing efficiency in the rest of the business, says Dave Aron, a Gartner vice-president.

A fifth of CIOs in the UK expect a budget increase and 47% said there will be no change. Of the 32% expecting a decrease, only 10% said the cut would be 10% or more.

David Roberts, chief executive of the Corporate IT Forum, says contractually committed values in IT budgets will remain for a while because it will take time for organisations to negotiate their way out of commitments. Any remotely discretionary budget is being cut, which in some cases could be as much as 25% of the IT budget, he says.

Small businesses are more likely to be facing shrinking IT budgets in 2009, when IT will be seen as an expense, says Peter Scargill, director of IT for the Federation of Small Businesses. "Significant numbers of SMEs are fearful for the future of their businesses and so cutbacks are inevitable," he says.

Improving business processes is at the top of the list of priorities for the organisations surveyed. This is followed by reducing enterprise costs, up from fifth position in 2008. In third place is improving workforce effectiveness, up from sixth last year.

But Geoff Connell, acting CIO for the London Borough of Newham, warns that investing in IT can push up costs, rather than save money.

"Mobile working and e-channel usage along with basic process automation cuts costs, but as more people use more IT, costs tend to go up and need to be contained," he says.

To be successful in 2009, Aron says CIOs will have to play a much wider strategic role across organisations to identify the capabilities the business needs and how IT will help it win.

Roberts says CIOs are gaining more business knowledge and developing people internally to have greater skills.

Richard Swann, head of IT at the Institute of Directors, says the trend of CIOs getting more involved in business is largely independent of the economic climate.

"The CIO should not stand out as different from the rest of the senior management team due to a lack of business knowledge, but should be involved in all areas," he says.

CIOs should exploit their overall and cross-functional view of processes and systems, and their knowledge of the information and infrastructure to support them, says Aron.

Getting more involved with the business to help use IT to drive efficiency is essential for CIOs, because doing what they have always done is no longer an option, says Connell.

"CIOs are being 'pulled' and therefore finding effective engagement easier," he says.

Taking a lead in identifying capabilities that must not be damaged through cost cutting will be essential, says Aron.

CIOs are in the best position to know the importance of capabilities such as flexibility, skills, innovation or knowledge to each area of the business and whether they are expendable or not.

"CIOs should refocus on business strategy and then prioritise the IT portfolio based on that," says Aron.

Connell says IT department's strategies for 2009 include unified communications to enable new ways of working with mobile IT.

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