CIOs Eye Tech Remedies to Economic WoesBy Brian P. Watson | Posted 07-14-2008
CIOs Eye Tech Remedies to Economic Woes
For months, conflicting economic projections, rising gas prices, ripple effects from fallout in the financial sector and other variables have left businesses struggling for answers. Will the economy get worse before it gets better? No one knows.
All the while, CIOs and their teams have been waiting for the axe to fall on their projects, staffs and services contracts. But there appears to be a silver lining. CIO Insight's research reports from this year show that CIOs have managed to steer clear of cutbacks, thanks to their investments in money-saving technologies and their own increasing status within their organizations.
Wise expenditures in consolidation and virtualization are delivering cost savings, which should be making CFOs happy, especially in these turbulent times. The rising price of energy may be a troubling sign for data center operations, but it's delivering a fringe benefit: the expectation of increased mobility, which has increased productivity and enhanced customer service. As CIOs gain more responsibility within their companies, their spending power could easily increase.
But obstacles remain. Even when they haven't faced budget cuts, corporate executives are keeping a close eye on returns from projects and emerging technology investments. Some buzzworthy collaborative technologies haven't proven their mettle in the enterprise, which could force CIOs to curtail future expenditures.
There's no doubt that the optimism expressed by CIOs earlier in the year could quickly turn if the economy continues to lag. In the meantime, as uncertainty looms, IT leaders must focus on what is working now.
Companies Haven't Curtailed Tech Budgets--Yet
Despite the economic uncertainty, most IT executives expect to get extra money for projects in 2008. Overall, a little more than two-thirds of those surveyed earlier this year on IT spending anticipate getting the go-ahead to make expenditures above and beyond their budget. That number sagged a bit from 2007, but it revealed a strong optimism that economic doubt won't immediately curtail IT spending.
Project execution also remains a high budgeting priority. More than half of this year's IT budgets have been devoted to maintaining ongoing initiatives, while the rest is split evenly between completing active projects and launching new ones. Those figures held up across all company sizes, illustrating a consistent expectation that IT operations aren't likely to change--yet.
Services--typically one of the first areas cut in a slowdown--are a large component of IT budgets, particularly among large companies, where they rank second to staff. On the savings side, CIOs and their teams are reaping benefits from investing in infrastructure consolidation and increased virtualization.
Companies Spend Modestly on Collaborative Tools
Collaboration gets a lot of buzz these days, but spending hasn't gone through the roof. Our survey found that IT executives are high on the potential of these technologies to boost productivity and give way to previously unimaginable strategies. But it also revealed that, despite the hype, not all collaborative technologies were proving as useful as anticipated.
IT executives told CIO Insight that they'll spend a little more than one-tenth of their budget on collaborative tools and technologies, though a healthy number of respondents planned to spend more than 20 percent. Businesses making less than $500 million in revenue were far more willing to spend a larger percent of their IT budget.
IT Chiefs See Their Influence Growing
IT leaders have significant spending clout. Need to make a large purchase, but don't think the CEO or CFO will go for it? Turns out it doesn't matter much: CIOs, on average, can single-handedly approve expenditures of almost $1.4 million. (Tack on an extra $850,000 for IT chiefs at large firms.)
If the description of their roles is any indication, that clout could be growing. About three in 10 CIOs also manage another area of the business--strategic planning, operations or product development, for instance. Those IT chiefs who described themselves as strategic were more likely to take on expanded roles. As their roles grow larger, will their spending power keep pace?
CIOs Remain Cautious About Telecommuting
High gas prices may drive a further increase in mobility. About half of the IT executives polled in our June report on mobility said they expect employees to work more days from home due to higher transportation costs. But an almost equal number said they don't expect telecommuting frequency to change during the next 12 months, signaling lingering uncertainty. Still, just over half of respondents said their company resists telecommuting. As more efficient mobile technologies take hold in the enterprise, CIOs will surely reconsider their policies.
New Tech Acquisition Requires Strong Payback
Executives are more likely to sign off on emerging technology investments if they have a strong cost-cutting benefit. Process improvement remains the top corporate goal for these expenditures, but for executives to buy in, CIOs need to sell them on the savings aspect, according to our survey of IT business-technology leaders.
Economic uncertainty isn't slowing the adoption of emerging technologies, despite the obvious risk involved and the usual lack of clear return-on-investment projections. The average share of the 2008 IT budget allocated to emerging technologies stayed even with 2007. And a majority of CIOs said their second-quarter spending would match first-quarter levels, when much of the economic uncertainty began to take hold. But it's not all free-wheeling: More than three-quarters of CIOs said they'll wait no longer than two years for their investments to break even.
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