According to the results of the first snapshot survey from Computer Weekly's IT opinion panel, over half of UK organisations have made cuts to their IT in the economic downturn.
Worsening economic conditions have also forced almost a third to cut jobs in their IT departments, according to IT professionals on the recently launched online panel.
Most (16%) reported staff cuts two to six months ago, but 10% said they had made redundancies within the past month. Only 5% said cuts were made more than six months ago.
Stephanie Elliott, managing director of recruitment firm Volt Europe, says the increase in job cuts two to six months ago indicates that the impact of market conditions was initially underestimated, "followed by a swift reaction when realisation set in".
The trend has been towards reducing permanent staff numbers and making greater use of contractors, according to Rethink Recruitment. This trend is expected to continue in the coming year, but fewer companies are planning to make cuts to IT staff and the decline in advertised jobs in the IT sector has slowed.
This indicates that the worst is probably over for IT professionals, according to Michael Bennett, director of Rethink Recruitment. IT has typically been leaner since the early 2000s, when it was badly hit, so in many cases organisations are down to the bare minimum, he says.
Big companies feeling the pinch
The average corporate IT budget has been cut by almost 10% across the panel. In many companies, IT is regarded as a cost centre, making it an obvious target, says Paul Williams, IT governance advisor to Protiviti.
"IT traditionally has not been good at articulating its value to key stakeholders within the enterprise," he says. CIOs need to get better at communicating the value of IT, says Williams, because although the board sees the cost of IT, they often do not really understand the contribution it makes. "Many CIOs have not been through a recession before and can become 'lambs to the slaughter' when it comes to budget cutting target.".
IT departments in larger organisations with more than 1,000 employees report the most cuts in budget and staff. Some 16% of the IT professionals who are members of the CW IT opinion panel and who took part in the survey say they have seen cuts of over 21% in their IT budgets. Most of these work for larger organisations, which David Roberts, executive director of The Corporate IT Forum, says are typically reporting cuts of between 16% and 21%.
"The larger organisations have been the first to experience the effects of the economic downturn and are making budget cuts accordingly," he says. Smaller organisations tend to feel the affects of recession later and are therefore more likely to think they have "escaped".
The 45% of panellists who say IT budgets have been little affected, tend to be those working in smaller companies with 50 or fewer employees. Similarly, the 69% of panellists surveyed who report no recession-related redundancies, work in smaller organisations.
Bennett says this is possibly due to the fact that smaller companies have less "fat" in their functions, both in terms of projects and staff. "If a larger organisation wants to reduce costs, it can stop projects, which will impact headcount," he says. Smaller organisations also typically have a higher level of outsourcing, which is usually subject to medium and long-term contracts, making cost-cutting more difficult.
More job losses to come
Elliott says larger organisations have put most new IT development on hold, which renders the skills of associated professionals redundant. However, the survey found that of those panellists who report no recession-related redundancies so far, just over 10% say they could be forced to make cuts in the next six months.
According to Elliott, IT in general has seen the worst of the recession, but some industries and sectors, such as the public sector, may still have worse to come. "We will continue to see redundancies, and no doubt we are in for a few surprises along the way.".
But organisations should keep staff wherever possible as they will be harder to replace when markets improve, says Bennett. "If you can retain people through these tough times your stock as an employer will increase."
Flexibility is key to staff retention, according to Elliott. "A less rigid approach to deploying skills can yield unexpected benefits as professionals rise to the occasion and gain practical experience on the job."
Elliott says that offering this an option sends out a positive message to staff that the company is exploring ways of keeping talented and competent people.
Organisations looking to cut IT costs without making people redundant should target their operating costs, which can make up to 70% of the total IT budget, according to Williams. IT chiefs should look beyond licensing, training and upgrade costs and instead review the applications portfolio. There are often missed opportunities to save costs in maintenance, back-up and recovery, and consolidation of processes.
"Operational cost savings can also be achieve through greater use of outsourcing and technologies such as virtualisation," says Williams.
Areas hardest hit by downturn
Budget cuts have impacted training and new projects the most, according to 37% of panellists, followed by desktop computers (29%), infrastructure (28%) and R&D (20%). Just 38% of panellists surveyed said their organisations had not experienced any cut in IT budget in these areas.
"Training organisations will say that it is short-sighted to cut training budgets, but given the choice of laying people off or cutting training, it is a no-brainer," says Bennett.
But Elliott points out that when training budgets were cut aggressively in the downturn in the 1990s, companies were left short of skills when the market improved. She says training budgets should be retained wherever possible as it ensures skills keep pace with technology and sends a positive message to staff.
The IT department is rated as one of the main business functions to be affected by the recession by all respondents. Only sales departments have been worse hit by the recession than IT in larger organisations, but the impact has been lower in smaller organisations where sales and marketing topped the rankings.
CW IT opinion panel
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