In-Depth

IT Budgets May Suffer in 2008

Economic uncertainty got you down? You’re not alone. Gartner says you need to start thinking now about a potentially tumultuous 2008.

• By Stephen Swoyer
• 11/13/2007

A recent bulletin from market watcher Gartner Inc warns that 2008 could be a very interesting year for enterprise IT managers. Because of emerging economic uncertainty and ongoing confusion—let’s call it turmoil—in global credit markets, IT organizations need to plan for the worst, Gartner says.

In fact, the firm suggests managers prepare not one but two IT budgets.

Gartner says companies should augment the IT budgets they’ve already prepared with another (or "back-up") budget that emphasizes cost cutting—just in case.

"Although the financial outlook for 2008 remains far from certain, waiting for a clear economic trend to appear prior to taking action is not a prudent option," said Ken McGee, vice-president and Gartner fellow. "There is already sufficient concern about the possibility of a business slowdown for next year from enough credible and independent sources to suggest that preparing a backup cost-cutting IT budget now is just plain good management."

Gartner even goes so far as to invoke the dreaded "R" word (recession), stressing that CIOs and IT managers need to have a "recession budget" and business plan on hand which they can implement "long before being asked to reduce costs." What, exactly, constitutes a recession budget? In Gartner’s thinking, it’s a budget revision that slashes costs by at least 10 per cent below the highest annualized IT spending run rate levels attained in 2007.

If nothing else, Gartner officials say, a proactive approach on the part of CIOs and their IT managers should help to shore up their stock with senior-level executives. That could pay dividends if or when companies start hemorrhaging jobs.

"Creating a responsible alternative recession IT budget now will demonstrate the type of innovative and forward thinking that senior executives expect to see from their staff," McGee said. "It will also show the kind of flexibility and agility needed to respond to fast-changing economic and business conditions."

There’s always a tendency to view an impending economic slowdown—or outright economic turmoil—with trepidation.

According to Gartner and McGee, however, CIOs and IT managers should instead focus on creating business plans that will enable their organizations to react with speed and certainty in an uncertain economic climate.