Europe, with slight increases in Latin America
and a bit of a decrease in Asia Pacific.
Whatever the final numbers, “all CIOs will
face the need to restructure their budgets,” Mr.
McDonald said.
Michael Twohig, CIO of Clean Harbors
Environmental Services Inc. in Norwell,
Massachusetts, USA, reported last December that
he has had to re-evaluate his 2009 IT spending
plan, noting that his worst-case scenario strategy
calls for serious cutbacks in expenditures for development projects. “We always try to run a tight ship,
but I’m looking at which projects we could literally
do without,” Mr. Twohig told Computerworld.
RECORD DROPS
Like McKinsey, Goldman Sachs Group Inc. is
making some rather dire predictions for 2009.
“Our reading on total IT spending is the lowest
in the history of the survey [which dates back to
2002],” says Sarah Friar, a technology analyst at
Goldman Sachs.
Based on responses from 100 managers at multinational Fortune 1000 companies, the study predicts
a seven percent IT spending uptick in emerging
markets. But balancing that against predicted
declines of five percent in developed markets, the
company forecast a one percent global drop. This
compares to six percent estimated global growth in
2008 and nine percent in 2007.
This trend isn’t limited to the corporate sector.
Chris Vein, CIO for the city of San Francisco,
California, USA, told bloomberg.com in December
that his group is facing a $576 million budget shortfall for 2009. “I’m not sure if I am going to have any
money to do any new projects, and we will be
reassessing our existing projects,” he told the site.
THE UPSIDE OF DOWN
It’s pretty tough to find the silver lining in the
economic crash. But the downturn is forcing
companies to take a hard look at IT strategy and
spending—and zero in on projects that boost the
bottom line.
“Enterprises expect IT to contribute results in
an uncertain economy,” Mr. McDonald said.
“CIOs need to be decisive and resourceful in
building an effective enterprise that can meet current and future challenges. Leading enterprises
recognize the seriousness of economic conditions,
but they are not paralyzed by them. Their leaders
have confidence in their ability to use IT to
achieve results.”
A December 2008 report from mega global
consultancy McKinsey & Co. comes to a similar
conclusion.
“With growth slowing and valuations declining, businesses badly need to extract value from
their IT functions,” it says. “As CIOs choose a
path, they need to … [balance] short-term financial
improvements and the possible impact on longer-term capabilities.”
An October 2008 McKinsey & Co. survey of
548 global executives also pointed to shifts in
where those IT dollars go.
Nearly two-thirds of respondents expressed
concerns about rivals implementing disruptive,
21The percent of
CIOs who reported
a drop in IT
budgets in 2009
SOURCE: Meeting the Challenge: The 2009 CIO Agenda
industry-changing technology, and the growing
reliance on IT systems for improving business performance and outperforming competitors. That led
to increasing pressure on IT executives to make
hard decisions about what projects get cut.
“The global economic downturn complicates
matters,” the report says. “Respondents cite continuing pressures to deliver on existing IT projects
and services at a time when they expect spending
to fall. So they are making trade-offs, reducing IT
operating expenses so they can maintain high-priority new investments that support broader
business goals such as improved sales force or
supply chain management.”
The report also calls for IT executives and senior IT staff to deepen their knowledge of business
needs and improve business accountability.
“The first step … is to improve transparency
in the planning and execution of IT projects for
business leaders,” the report says. “Then IT can
demand increased business involvement and
accountability for the delivery of these projects.”
