CIO IT Budget Tactics For Recession and Recovery

Plenty has changed over the last nine months – bankrupt auto makers, government bailouts, a financial crisis, a Wall Street meltdown and a deep global recession, for starters. It’s not surprising that CIOs have responded to the changes with some of their own. But just what is going on inside those budget meetings and project planning sessions at customer sites?Gartner conducted two surveys of CIOs, one between September and December of 2008 and another between March 1 to April 30, 2009. CIO responses reveal a starkly different approach to a changing marketplace and show the new realities solution providers are likely to encounter during sales engagements. Here’s what the CIOs said.

What CIOs said in fall 2008: Flat Budget for 2009 with a tiny increase of 0.16 percent.What CIOs said in spring 2009: Budget shrinkage of 4.7 percent for 2009.

Exactly 46 percent of CIOs say their 2009 budget has changed since it was finalized. More than 90 percent of those reduced their budgets, on average by 7.2 percent, 4 percent increased budgets and 54 percent made no change between fall 2008 and spring 2009.

The two primary areas for reducing budgets were renegotiation of vendor contracts and head-count reductions.At the same time CIOs shifted more work in-house and delayed purchases rather than reduce IT project investments.

With the exception of one vertical industry, CIOs in all major industries reported budget reductions in Q1 of 2009. Declines included: • Professional services down 10 percent• Telecom and high tech down 10 percent• Manufacturing down 8 percent• Utilities down 4 percent• Financial services down 4 percentThe only industry that experienced an increase was healthcare, which increased its IT budget by 2.2 percent in Q1.

The percentage of CIOs with a contingency plan for the rest of 2009 has more than doubled compared to 2008. Those with contingency plans are planning for renewed IT spending and also for more reductions. While 44 percent of CIOs don’t think they will need to tap into their contingency plans, those who think they will expect to do so in the next six months.

CIOs generally think the economic recovery will come between Q1 and Q3 2010. When it does arrive, the first IT investments they plan to make will be on IT projects and IT workforce levels. The survey also showed that product investments — software, hardware and infrastructure are also high on the list of investments CIOs will target when the economy recovers.