While IT spending is predicted to slow, CIOs should focus on making targeted cost cuts and look to leverage young talent to replace retirees.
Posted Dec 8, 2006
Everything from cutting costs to promoting an up-and-comer should be on CIOs' minds as IT executives get ready to start a new calendar year. According to two new reports from Forrester and Gartner, while CIOs will have to deal with reduced IT spending and new technologies that will alter how they operate, CIOs can take advantage of the change.
After two consecutive years of 8 percent growth, global purchases of IT goods and services wills slow to 5 percent in 2007, reaching $1.55 trillion in sales according to the Forrester report, "Global IT Spending And Purchases Forecast, 2006 -- 2007." U.S. purchases of IT goods and services will also grow 5 percent in 2007, the slowest rate of growth since 2003, but better than Forrester had projected a year ago. "This is a caution flag for IT vendors; 2007 will be a challenging environment," said Andrew Bartels, vice president of Forrester Research, in the study. "Sales in the U.S.--the largest single technology-buying market in the world--will be hard to come by as CIOs reduce or delay IT purchases." Bartels says the single most important variable impacting future technology spending worldwide will be the state of the U.S. economy.
A year ago, Forrester projected that 2007 would see little or no growth in U.S. IT purchases due to the anticipated economic slowdown. However, it now appears that the U.S. economic downturn will be milder than anticipated. Still, the slowdown will be enough to have an impact on major IT vendors.
While budget restraints and spending will be top-of-mind for many CIOs heading into the new year, Gartner's annual "CIO New Year Resolutions" report also highlighted the importance of personnel changes and technology trends that will affect IT departments from within. "2007 will see mounting demand for business growth and agility, rapid development of consumer technology, and increasing availability of new infrastructure tools, at the same time as the evolution of the IT organization continues to pick up," says John Mahoney, vice president and analyst at Gartner.
Mahoney sees social networking, collaboration, remote working, collective intelligence, and Web 2.0 altering the IT environment from within in 2007, allowing people to interact, create value, and contribute in new ways. "This will transform the nature of IT organization, staffing, and responsibilities."
With this new environment will come personnel changes as CIOs look to bring younger minds into the mix. As the baby boomer generation, born 1946-1964, starts to retire en masse, IT departments will lose their wisdom and leadership. On the flip side, this also presents an opportunity to clear out some "dead wood," or people that were overpromoted in the early day of IT and some outdated attitudes stifling progressive thought, according to the report.
In line with the Forrester report, Mahoney also sees CIOs becoming masters at managing and reducing IT costs. While sometimes essential, it has become damaging to longer-term strategies for growth and leads to underinvestment in infrastructure, Mahoney says. "We recommend CIOs tag savings from one area, for direct application in another. CIOs must be specific when it comes to savings." CIOs should report regularly on business value delivered for complete projects and make simplification a mantra. "This isn't the same as cutting costs, it means redesigning business processes for less complex and expensive systems."
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