A cloud hangs over CIO budgets and tech hiring

CIOs will face more pressure to cut costs, according to the CIO survey from SIM. But the details of CIO budgets and tech hiring are complicated.

Maybe it's a bit soon for hard-and-fast pronouncements on CIO budgets and tech hiring -- most CIOs are just embarking on next year's plans. Early signs, however, suggest CIOs will face even more pressure to cut costs in 2013 than this year.

Linda TucciLinda Tucci

In the annual survey of 3,500 CIOs and IT leaders from the Society for Information Management (SIM), for example, "business productivity and cost reduction" displaced 2012's "business and IT alignment" as IT management's top concern in 2013, up from the No. 4 spot last year. "IT cost reduction" has jumped to fifth place, up from 10th a year ago. Respondents also told SIM they plan to exercise much more caution on hiring in 2013. Reducing expenses is only the half of it. "Revenue-generating IT innovations " is now IT management's fourth-highest concern in this year's survey, up from ninth place last year, proof that the pressure is on to use IT to help make money, not just spend it.

The survey makes it clear that CIOs will realize some of the cost savings through the use of internal offshore labor and outsourcing, said Jerry Luftman, Ph.D., who conducts the survey for SIM every year. CIO budgets for internal IT staff located offshore will increase more than five-fold in 2013 to 11%, up from 2% the previous two years. At the same time, budget for internal staff will drop to 31%, from 37% in 2012. The percentage of CIO budgets allocated to offshore, outsourced staff will double in 2013 to 4%, up from 2% in 2011. Budgets for domestic outsourcing will nearly triple in 2013 to 8%, up from 3% in 2011. "Outsourcing is on the rise generically. And the trend is for more offshore staff," said Luftman, professor emeritus at Stevens Institute of Technology and SIM vice president.

CIOs will face even more pressure to cut costs in 2013 than this year.

"Part of the outsourcing will involve cloud," he added, pointing to the uptick in offshore outsourcing for hardware, network and software projected for 2013. More talked about than implemented during the past two years, cloud computing is gaining traction, Luftman said, noting the decrease in companies with no or nearly no internal cloud computing and three-fold rise in the companies (from 6% to 20%) with a small budget allocation for cloud. "I anticipate next year we'll see the percentage of budget for cloud be much higher," he said.

A cloudy future

At SearchCIO.com we've been putting out our own feelers to CIOs on their 2013 budget plans. So far the responses have been scattered, depending on the industry and whether systems need replacing or refreshes have already been done. But two points do keep coming up. First, not much hiring is going on. "I am constantly challenged to do more with the same staff. We constantly look for new tools, methodologies, efficiencies and training to make our staff more productive than they were last year," said Greg Taffet, the CIO of a fast-growing natural gas and electricity provider. Every CIO we've talked to on 2013 budgets has said the same. The second common cause? "It's becoming an expectation now that any budget has to be defensible against a comparable cloud-based service," said the CIO of an investment group focused on neighborhood revitalization.

Employment data from the most recent Bureau of Labor Statistics (BLS) report indicated austerity measures are beginning to pick up. Following job gains in July and August totaling 36,300, 1,700 IT jobs were lost in September, the first decline in 25 months of BLS reports, according to an analysis of the report by Foote Partners Inc. Based on interviews with CIOs and business executives in numerous industries, Foote Partners believes the sudden decline is likely temporary, a blip more related to election cycle uncertainties and the so-called fiscal cliff, or perhaps a collective corporate lull before the final push to year's end.

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Any good news? A bit.

"In general I'm noticing that tech is seen as a big enabler in a lot of corporate plans, ranging from product/service development and delivery, to operations (including security), to partnering and collaboration," Foote wrote to me in an email. He's seeing "big commitments" to keeping people with "deep tech skills, knowledge and experience" on many levels. "They want to get 'em, grow 'em, and especially to keep 'em. Turnover has become a concern. We're hearing this almost daily, how they're fighting not to lose key people who are being aggressively recruited away."

What all this means for CIOs in 2013 is hard to say. This is a complicated time for IT hiring, when not one, but three, consumer-friendly technologies -- cloud, mobility and social networking -- are forcing CIOs and their IT departments to figure out how to deliver enterprise computing with new and unfamiliar tools. The upside here is that IT salaries are projected to be higher in 2013 than 2012 in 60% of companies, and lower in only 13% of the companies surveyed by SIM.

And despite the trash talk about the CIO job disappearing as IT grows more integral to business, the CIO's status is going nowhere but up, if the executives we talk to are any measure. During this Great Recession, CIO watchers like me have marveled at the difference in how IT operations -- and the reputations of CIOs -- have fared compared with the dark years after the dot.com bubble burst. Back in 2001, bubble-inflated IT budgets were the first and prime places businesses looked to cut costs -- decimated is too mild a term for what happened to IT staff. Tech hiring dried up. The average tenure of CIOs withered to under two years in the worst of the tech backlash. Since that tech recession and through the jobless recovery, doing more with less was every successful CIO's mantra. So when the worst fiscal crisis of 50 years hit us, CIOs rolled with the punches. More than that, the business was coming to them for solutions. I remember coming back from the Gartner Symposium in 2010 thinking CIOs were fired up and ready to go. "You're not the bottleneck. You're not the long tail. You're not the reason why they can't implement strategy," Gartner analyst Mark McDonald cheered. "You own the speed of execution because you can't touch anything without touching IT these days." Corporate seems to get it because, according to the SIM survey, the percentage of the corporate budget allocated to IT was up 40% in 2012 (to 4.94% from 3.55%), maybe meaning that as revenue has dropped, CIO budgets have dropped less. In this case, I'd venture, less is more.

Let us know what you think about the story; email Linda Tucci, News Director.

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