IT leaders need to create a second, contingency budget for 2008 in case the economy worsens

Chief information officers (CIOs) should create a contingency IT budget for 2008 in preparation for continued economy uncertainty, according to analyst Gartner.

Instability in the global credit markets and concers over the future economic climate mean companies should plan for all eventualities, said Gartner.

The analyst suggested that CIOs create two separate budgets: The first should reflect the guidance already provided by senior decision-makers, with a contingency budget which assumes the need to cut costs in response to the arrival of a business slowdown.

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 Gartner vice-president and fellow Ken McGee.

“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,” said McGee.

According to Gartner, CIOs need a recession budget and business plan ready for immediate implementation before a time when they may be asked to reduce costs.

Gartner recommended that such plans should target a decrease in IT spending of at least 10 per cent below the highest annualised IT spending run-rate levels attained in 2007.

CIOs and IT managers preparing a recession IT budget will demonstrate the type of innovative and forward thinking that senior executives expect to see from their staff, said McGee.

“It would also show the kind of flexibility and agility needed to respond to fast-changing economic and business conditions,” he said.

Firms should use the possibility of a business slowdown as an opportunity to demonstrate how their organisation can react with speed and certainty if the worst economic conditions arise, said McGee.