dget drop dramatically, and that means stretching life-cycle upgrades, consolidating servers, and making do with fewer staff. Located some 70 miles from Silicon Valley, the school is also constantly seeing talented folk jump ship. “We have constant, unplanned reduction in force,” Halwachs says wryly.
Yet somehow the school must continue to support some 400 faculty, 900 staff, and 1,400 students from all the uniformed services, as well as about 50 foreign countries. In addition to making sure the school’s technology labs align with the Navy’s future technology directions, Halwachs is in charge of the school’s telephone infrastructure and cable TV franchise for residence quarters. His major budget initiative this year will be to upgrade the telephone system. “Quite simply, we’re expected to do more with less,” he says.
Even in the event of a major slowdown, most public companies would not have to tighten their belts to the extent the Navy has. Yet analysts say CIOs should prepare for slower growth.
“Our research indicates that IT budgets will continue to grow, just not as fast,” says Peter Burris, co-research director and CEO and president of the Dot-Com Division of META Group, in Stamford, Conn. Burris believes that budgets will continue to grow at about twice the rate of the Consumer Price Index. In the event of a slowdown, that could mean IT budgets, currently growing at about 8% to 10% annually, might slip to 5%. “Even in the case of a harder landing, two times real growth is not out of the question,” he says. Yet Burris is adamant that, no matter what the economic circumstances, CIOs should focus on a few things immediately.
The first is value management. “In the event of a slowdown, it’s no longer viable to just cut the IT budget across the board,” Burris says. Instead, he says, CIOs have an obligation to protect those areas where IT is an instrumental player in business innovation and/or revenue generation. “CIOs should be devoting a fair amount of time in the first quarter to laying down formal regimes that clearly articulate the relationship between IT and productivity,” he says. Such regimes would formalize investment priorities and strategies, including pricing, service level, and risk. In particular, says Burris, CIOs should look closely at overall sourcing management, with an eye toward introducing best practices.
Ricardo Diaz-Rohr, CIO of Lufthansa Passenger Airlines, in Frankfurt, Germany, devotes a substantial portion of his time to value management. He ticks off the issues: “How do you create stability for selecting and working with partners? Which offer the correct infrastructure? Are they upgradable? What about security? How do you manage project risks? How do you ensure that what’s promised is delivered, and how do you ultimately manage the outsourcer to get the performance you need?” With over 100 providers in Germany claiming to offer CRM alone, he says, devising a formal outsourcing strategy is a top priority to ensure stability. He notes that project management is a decisive skill that will become increasingly important as many companies turn to build-and-run IT solutions.
One silver lining in the event of a slowdown, Burris says, is that the huge pressure to deliver projects quickly would abate, leaving CIOs more time to think strategically. “By strengthening their strategic sourcing relationships and thinking in terms of long-term sourcing rather than short-term procurements, they will be ready to move strategically when the economy heats back up,” he says.