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Economic crisis means hard times, hard decisions for IT

With the recession putting a big squeeze on IT budgets, cutbacks are the rule. But CIOs are trying to keep key tech projects on track.

By Craig Stedman
March 8, 2009 12:00 PM ET

Computerworld - As the economic news continues to get bleaker, double-digit budget cuts are becoming a fact of life in many IT departments — resulting in postponed purchases, delayed projects, hiring freezes and layoffs.

The situation is undeniably grim, posing stiff leadership challenges for CIOs. But if there's a silver lining, it's that key IT initiatives in many cases are proceeding as planned, partly because of a desire among business executives to rely even more heavily on technology to help reduce corporate costs and boost revenues.

For example, Auto Warehousing Co.'s IT staff has been relatively lucky — although certainly not unscathed. AWC processes new cars for automakers, and it's feeling the pain of the drop in car sales. For IT, that means a 24% budget cut this year.

Dale Frantz, AWC's CIO and chief technical officer, has frozen salaries and new hiring, eliminated most travel and put off hardware replacements and other capital spending until 2010.

But Frantz said last week at Computerworld's Premier 100 IT Leaders Conference in Orlando that he has been able to avoid job cuts thus far. And AWC is taking advantage of the business slowdown to expand its systems to some lower-volume facilities that had limited automation or none at all.

The recession "isn't good for IT per se," Frantz said prior to taking part in a panel discussion on economic issues. "But we do have an opportunity to clean up the processes at facilities where things maybe weren't as efficient as they could be."

Also helping to protect IT jobs, Frantz said, are the lower software licensing costs that are kicking in as a result of AWC's conversion from PCs to Macintosh systems, which began in 2007. "This turned out to be a great year to have that happen," he noted.

Marie Mouchet, CIO for electric utility Southern Co.'s nuclear, power generation and wholesale power units, said the Atlanta-based company has reduced overall IT spending by about 10% because of the downturn. Her team has cut merit raises, left vacancies unfilled and pushed back some projects, Mouchet said.

And, she added, when IT managers meet later this month with the chief financial officers of the utility's operating companies for a quarterly review of tech projects, the focus "is all going to be about cost."

But Mouchet hasn't had to cut her IT head count, and most major projects remain on track. That includes the rollout of a new billing system for wholesale contracts, plus a companywide deployment of Oracle Corp.'s financial applications and IBM's Maximo asset management software — a project that is expected to cost hundreds of millions of dollars.



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