It’s been described as "paramount" that CIOs continue to have access to funding to help organisations carry out digital transformation, according to a leading Gartner analyst.
There are rumours that an increasing number of organisations and their boards are instructing CIOs to cut their IT budgets amid turbulent economic conditions but CIOs have been urged to hold firm to avoid wider negative business outcomes.
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In the present day, IT is front office and revenue-generating, in contrast to the 1990s when it was strictly “back office” with IT cost cuts having less of a business impact, said Stewart Buchanan, VP analyst at Gartner.
He added that it’s now more difficult to cut costs without damaging a business’s performance considering how reliant companies are on IT.
If CIOs don’t have access to funding, it may not be possible to restructure the rising business costs meaning organisations will accumulate technology debt, mistaking inaction for a cost saving.
Moreover, if decision-makers decide not to increase a CIO’s budget because they’re worried about inflation, it won’t actually reduce the cost of IT or the business’s demand for technology, he argued in a written Q&A.
“In response to the current economic turmoil, organisations are using digital technology to realise operational efficiency and cost savings and to transform their company’s value proposition, revenue, and client interactions,” said Buchanan.
“This means a steady IT budget is necessary to push these digital business initiatives forward. In fact, Gartner forecasted that worldwide IT spending will increase 5.1% in 2023.
“Often the root cause of pressure to cut IT budgets stems from a failure to articulate the connection between technology spending and business outcomes. If the board or C-suite mandates technology spending cuts, the CIO should present a business view of IT spending against business performance."
To help executives understand the correlation between IT and positive business outcomes, CIOs may find it useful to draft a clear business view of IT spending as it will make for a more compelling case against cutting IT budgets.
For example, if customer relationship management software is helping to drive sales growth, it’s probably less likely to be cut.
CIOs also need to talk to business stakeholders to make them technology advocates at a board level. This could mean carrying out risk assessments to highlight how IT budget cuts could damage business performance, or even end up costing the organisation more money.
Buchanan underlined said emergency IT budget cuts were “rarely optimal” for organisations but advised CIOs that it’s fairly impossible to rapidly cut without incurring risks.
These risks need to be explained to stakeholders so that the responsibility is shared. Additionally, he said that CIOs should focus on how much IT spending can be reduced during the emergency time period and that reduction targets usually take priority over other goals until they have been met.
