CIOs share survival tactics and recovery strategies

Their minds are chiefly in cost-control mode, but IT leaders must begin to train their sights on the challenges they and their companies will face when the economy begins to rebound.

That’s the general theme 100 or so IT leaders have been focusing on during BusinessWeek’s two-day CIO Summit, which kicked off in Boston on Thursday.

“We are now captive in many ways to the U.S. economy in terms of IT spending,” said William S. McNee, managing partner at Saugatuck Technology in Westport, Conn.

CIOs are in cost-cutting mode, they’re focused on ROI measurements and they’re putting off upgrades a year or two. But, he asked, how long can IT leaders continue to postpone?

“It’s great to be in stall mode so long as your competitors are also in stall mode,” he said. However, “the spending dam will break.”

When that happens, IT leaders will be caught in the undertow, warned Karl Wachs, CIO at Celanese AG in Germany. Once IT workers spend six to nine months unemployed, they’ll start turning to other professions. So when companies look to rehire IT talent, that talent will be gone.

IT leaders must start spending now, because a year from now resources won’t be around and demand will drive prices back up, he said.

The key, said conference speakers, is to balance IT spending with cost control.

For instance, Rhonda Hocker, CIO at San Jose-based BEA Systems Inc., said her IT spending has gone up 25 percent this year. But she’s partnered those increases with major cost-cutting initiatives, which have helped trim 20 percent from BEA’s US$30 million IT budget.

Some of Hocker’s cost-cutting strategies include renegotiating contracts with vendors, standardizing and reducing BEA’s infrastructure, and centralizing the management of service providers, she said.

Despite their short cash flow, companies have to be able to face rapid and constant changes, such as privatization, deregulation and the rise of emerging markets around the world, said C. K. Prahalad, business professor at the University of Michigan in Ann Arbor and chairman and founder of Praja Inc., a San Diego software company.

To do so, they need to make their IT infrastructures flexible enough to respond to those demands, he said.

In an interactive poll during Prahalad’s session, nearly all attendees admitted that their industries and organizations are undergoing a moderate to very high extent of change, but that their companies aren’t adequately handling it.

A big difference in business today is the transparency between consumers and companies, said Atefeh Riazi, CIO at Ogilvy & Mather Worldwide. “They’re seeing how inefficient we are, so we have to do something about it,” she said.

Rather than just automating and computerizing operations, CIOs need to get a handle on the information overload that’s restraining companies, said Riazi.

She told the audience about a recent Superman costume she bought for Halloween. The tag on the cape stated that it would not enable one to fly — obvious, perhaps, but something IT leaders need to keep in mind, she said.

“The CIO feels he can put in an IT initiative, and it’s going to make him fly,” she said.