Chief information officers said they are facing pressure to increase some tech investments and reduce others as recession fears, although they do not expect tightening on the same scale as previous recessions.
This is partly because the COVID-19 pandemic and the rise of cloud computing have illustrated the importance of enterprise technology and digital transformation, the CIO said.
Discretionary spending such as proof-of-concept tests – which confirm whether an emerging technology is ready for commercialization – can be pushed back, but businesses see more value than ever in technology that can help customers will enhance the experience and give them a sharp edge in tight markets, executives and analysts said.
The CIO said corporate boards and other business leaders today are more likely to understand the value of technology. If there is a cut, then the CIO, who has In recent years the core business has moved closer to operatingSaid he expected to play a key role in those conversations.
About 90% percent of a CIO’s budget includes significant expenses, such as cloud subscriptions, that need to be paid for, no matter what, said John-David Lovelock, a research vice president at a tech research and advisory firm.
The remaining 10% include things like proof-of-concept tests, new laptops or tablets for employees and licensed software updates, he said. That’s another discretionary area where spending can be cut for a year or two, though Mr Lovelock said such spending is unlikely to cut big as the overall cost savings would be small and employees would feel the impact immediately.
Federal Reserve Chairman Jerome Powell said Wednesday that the central bank’s fight against inflation could help raise interest rates. high enough to cause an economic downturnThe latest warning of an impending recession.
As companies grapple with economic uncertainty, the CIO at Rocket Mortgage LLC,
sales force Inc.
And other companies said that tech projects with real business cases will only become more important.
“I feel the pressure to use technology to create more efficiency, to scale more, to automate more,” said Brian Woodring, CIO of Detroit-based Rocket Mortgage. As the size of the mortgage industry shrinks, he said, now is the time to increase technology spending to create a better customer experience and capture market share.
“The message I’ve heard from most of our business partners is that it’s going to be a tough year,” he said, but “it’s time to lean into a recession.” Mr. Woodring said the company could actually end the rising spending on major technology projects this year.
Even so, this is not necessarily the case across the board. When called for a cut, expect to work in areas with an immediate business case, said Salesforce CIO Juan Perez.
“Something ‘to do for good’ is probably being pushed into some companies,” he said. He said proof-of-concept testing on emerging technologies could be one area that faces cuts.
“Some things will be off the table until things get better or they can come back again, but the CIO will play a key role in making these kinds of decisions,” he said.
At the same time, he said, CIOs who have become increasingly business-savvy in recent years are in a great position to communicate to the leadership team when technology is important to the organization and when “it’s not so important.” Push it aside. We will deal with it later.”
Gartner’s Mr Lovelock said the planning horizon for the tech budget has narrowed, meaning CIOs can sign two-year, one-year or six-month contracts where they used to sign for three to five years. While their long-term goals may be similar, he said, CIOs are facing pressure to ramp up along the way.
The decline in IT spending during the 2008 recession was less severe than during the 2001 recession, and in the 2020 market turmoil, IT spending actually increased, Mr Lovelock said. He said that in this slowdown, IT will be crucial to help businesses pivot to find new ways to increase revenue and he expects budget cuts in other business sectors rather than technology.
Kevin Vasconi, CIO
said it is investing in artificial-intelligence-enabled voice technology to enhance the customer experience at fast-food chain locations. He said that even as the budget is tightening, the business case for this type of technology, which he believes will increase productivity, will stand on its own.
“We’re always trying to make a pretty rock-solid business case for technology. And if it’s there, and the market shrinks a little bit, it’s still going to be there,” Mr. Vasconi said.
In a recession this year, he said, “I don’t think it’s going to be, ‘Let’s just cut the tech budget.’ I think it’s going to be, ‘Hey, we have to be more careful about what we spend money on, and let’s make sure those are the things that are going to drive the business.
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