Entrenched IT spares enterprise CIOs from deepest cuts

Beverley Head
Monday, 17 August 2009 12:30

IT Industry - Market

Previous economic downturns such as those triggered by Black Monday and Tech Wreck prompted deep IT budget cuts; but large enterprises and government are now so IT-dependent they can no longer unilaterally slash budgets, which is protecting IT projects and headcount.

Peter Bars, the senior partner responsible for Deloitte’s technology advisory service, was working in London when Black Monday dawned in 1987, “and almost overnight we had people rolling off projects.” In Melbourne for the dotcom crash “we again had projects go slow.”

By contrast, “This has been a really unusual recession,” in that most of the big enterprise projects have been left unscathed. Bars (whose client base mainly comprises companies in the ASX top 50 and large government departments) says because IT has now become so deeply embedded in enterprise processes, it is very hard to turn off the investment tap when times get tough. In addition many current IT projects were sparked by booming private equity and M&A activity in the lead up to the recession, and had to proceed regardless of the economic climate.

When industry analyst Gartner surveyed Australian CIOs late last year, just as the downturn bit, they indicated they were relatively optimistic, predicting a modest 1.67% increase in IT budgets for the year. By the end of the first quarter when Australian CIOs were quizzed again, they had a much blacker outlook, saying budgets would drop 6 %. However Linda Price, group vice president of Gartner executive programmes in Asia Pacific, acknowledges that far fewer CIOs responded to that second survey, and that the doom and gloom might have come from CIOs whose budgets had been savaged, and who wanted to publicly share their pain.

“Anecdotally it’s patchy,” added Price. She said mining, engineering, publishing, government and finance sector CIOs were facing increased scrutiny of IT projects and a reduced appetite for risk. CIOs were also under increased pressure to “Kill off the zombie projects.”

According to Deloitte’s Peter Bars; “When we first started with the GFC I think everybody drew a deep breath. What has been surprising for me is the continuity of investment among our clients. We are not seeing many projects pulled or mothballed.”

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