When enterprise IT departments have to make cuts of over 5% of their budget they are most likely to reduce staff, c...
September 3, 2008
When enterprise IT departments have to make cuts of over 5% of their budget they are most likely to reduce staff, cut salaries, and eliminate vendors and outsourced contracts to achieve targets, according to an Info-Tech Research Group study conducted this summer.
Companies in the health care, transportation and manufacturing sectors in particular frequently achieve any necessary budget cuts through layoffs, citing rising fuel costs as a key driver for cost-cutting.
“Since the dot-com crash, IT departments have been running lean to avoid making large-scale budget-cutting actions again. Many IT managers have been working with the same or reduced budgets year over year, with a quarter of them seeing budget reductions of more than 10% in 2008,” said Aaron Hay, research consultant with London, Ont.-based Info-Tech Research Group. “But they could soon be asked to give up more in view of the economic picture and escalating energy costs.”
The Info-Tech study conducted this summer involved 167 surveys and 60 personal interviews with senior IT leaders at companies from a diverse mix of industries, primarily in the U.S. and Canada.
Companies surveyed said that IT staff reductions have typically been comprised of 44% entry-level and intermediate employees, 19% management staff, 17% contractors, 15% senior staff; and 5% consultants.
While cutting staff and salaries can deliver quick bottom-line benefits, reductions can also have a negative impact on morale of remaining staff and their ability to maintain IT service levels.
As well, revenue-generation of the overall organization is negatively impacted in one-quarter (24%) of businesses surveyed, the study found.