Posted by: Linda Tucci
IT budgets; IT hiring; CIO, Outsourcing
Come Labor Day, thoughts turn to IT budgets and technology hiring — or mine do, anyway. So, this week I sent out feelers to CIOs and people who track technology spending and labor statistics. Could they tell me what’s happening? With talk of a double-dip recession heating up just as summer winds down, are CIOs making contingency budgets? Six months ago, some CIOs I talked to were complaining about talent shortages, even a technology hiring crisis, as they moved forward with major projects that had been put on hold. Are they retrenching?
This being the last week for summer vacations, word back has been slow in coming, as you might imagine, and forecasts for the second half of the year are turning out to be ambiguous, or at least insufficient for making broad claims. Gartner analyst Mark McDonald, who probably talks to as many CIOs as anyone in IT, wrote back that industries are more fragmented than ever on technology spending. “It’s not unusual to see two companies in the same industry pursuing different strategies — one investing and the other cutting,” he said in an email.
Gartner’s survey on technology spending and hiring doesn’t get sent out until mid-September, McDonald said, but his intuition is that CIO budgets are pretty solid, mainly because they are “about as low as they can go” after the 15% cuts inflicted in 2007. When Gartner people have asked around about cutting IT budgets again, given the market jitters this summer, “we are getting funny looks back from CIOs,” he said. “CIOs are looking for a clear signal rather than giving a knee-jerk response to the noise.” Keep in mind, he added, that CIOs have something they haven’t had in a long time: new technologies like cloud, mobility and social that warrant investment.
Maybe so, but rumblings are out there. In contrast to the data showing strong technology spending and steady hiring in pockets of IT through the second quarter, there are signs of a slowdown for the third quarter. And analysts from the various think tanks and consultancies, including Gartner’s economics practice, are starting to issue warnings of IT budget cuts.
In the midst of trying to read the tea leaves, my phone rang. It was the CIO of a family-owned chain of supermarkets in the Northeast, with 18 stores and 4,000 employees. The business needs all the IT that a giant supermarket chain has, from point-of-sale specialists and database administrators to a reliable and secure IT infrastructure. He isn’t hiring, he told me, but not so much because of the economy as because of the size of his business: “The skills I need I can’t afford.” So, in recent years, he has outsourced most IT operations and downsized his internal staff to a crew of four, including himself. Connectivity is so much better than 10 years ago that he can do that — “as long as you have good partners.” His main function is vendor management. “I add no value by running servers and doing backup and restore and maintenance. We need to focus on groceries,” he said, adding, “It keeps our profile low.”
I was struck by that. Does he worry that by outsourcing most of IT and keeping a low profile, his company might decide to do away with him and his staff altogether? Well, he comes to the job with 20 years’ experience in the grocery business; but if so, “that’s fine.” he said. “I’ve written myself out of jobs before, where my position did not make sense.”
This CIO’s situation is no doubt different from that of CIOs at large enterprise companies, particularly at companies dripping in profits, as opposed to the low-margin supermarket business. But his focus on adding value to the business, by whatever means — even if that means writing yourself out of a job — seemed like a courageous statement for any CIO these days.