CIOs Expect Solid Tech Budgets Despite Recession Fears
Share this @internewscast.com


Chief information officers said they are facing pressure to ramp up some tech investments and reduce others as fears of a recession mount, though they don’t expect tightening on the same scale as in previous downturns.

That’s partly because the Covid-19 pandemic and the rise of cloud computing have illustrated the importance of enterprise technology and digital transformation, CIOs said.

Discretionary spending such as proof-of-concept tests—which validate whether an emerging technology is ready for commercialization—could get pushed back, but businesses see more value than ever in tech that will enhance the customer experience and give them an edge in an increasingly tight market, executives and analysts said.

Recent stock market performance has gotten people talking about a possible U.S. recession. So what are the leading economic indicators that have been solid recession trackers, and what can you do to prepare for a recession? WSJ’s Dion Rabouin explains. Illustration: David Fang

Corporate boards and other business leaders today are more likely to understand technology’s value, CIOs said. If cuts do occur, CIOs, who have gotten closer to core business operations in recent years, said they expected to play an important role in those conversations.

About 90% percent of a CIO’s budget includes vital spending like cloud subscriptions that need to be paid no matter what, said John-David Lovelock, a research vice president at tech research and advisory firm

Gartner Inc.

The remaining 10% includes things like proof-of-concept tests, new laptops or tablets for employees, and licensed software updates, he said. That second discretionary area is where spending could be reduced for a year or two, although Mr. Lovelock said such expenses aren’t likely to face big cuts because the overall cost savings would be low and employees would feel the effects right away.

Federal Reserve Chairman

Jerome Powell

said Wednesday that the central bank’s battle against inflation could lead it to raise interest rates high enough to cause an economic downturn, the latest warning of an impending recession.

As companies grapple with economic uncertainty, CIOs at Rocket Mortgage LLC,

Salesforce Inc.

and other companies said tech projects with real business cases will only become more important.

Brian Woodring, CIO of Detroit-based Rocket Mortgage, says now is the time to ramp up tech spending to create a better customer experience and gain market share.



Photo:

Isabelle Bousquette / The Wall Street Journal

“I feel pressure to use technology to create more efficiency, to create more scale, to automate more,” said Brian Woodring, CIO of Detroit-based Rocket Mortgage. As the size of the mortgage industry shrinks, he said, now is the time to ramp up tech spending to create a better customer experience and gain market share.

“The message I hear from most of my business partners is look, this is going to be a rough year,” he said, but “recessions are the time to lean in.” Mr. Woodring said the company could actually end up increasing spending on key technology projects this year.

Still, this isn’t necessarily the case across the board. When cuts are called for, expect work in areas with less of an immediate business case to be among first to go, said Salesforce CIO

Juan Perez.

Salesforce CIO Juan Perez



Photo:

United Parcel Service Inc.

“Some of the ‘nice to haves’ are probably going to be pushed out in some companies,” he said. He added that proof-of-concept tests on emerging technologies could be one area that faces cuts.

“Some things will get off the table until things improve or they can come back again, but the CIOs will play a critical role in making those types of decisions,” he added.

At the same time, he said, CIOs who have become increasingly business-savvy in recent years are in a great position to communicate to the leadership team when tech is vital to the organization and when “this is not that important, push it aside. We’ll tackle that later.’’

Gartner’s Mr. Lovelock said that planning horizons for tech budgets have gotten shorter, meaning CIOs might be signing two-year, one-year or six-month contracts where they used to sign for three to five years. While their long-term goals might be the same, he said, CIOs are facing pressure to build off ramps on the way.

The decline in IT spending during the 2008 recession was less severe than it was during the 2001 recession, and in the market turmoil of 2020, IT spending actually went up, Mr. Lovelock said. He added that in this recession, IT will be vital in helping businesses pivot to find new ways to drive up revenue and he expects budget cuts in other business areas instead of technology.

Wendy’s CIO Kevin Vasconi



Photo:

Wendy’s Co.

Kevin Vasconi, CIO of

Wendy’s Co.

, said he is investing in artificial-intelligence-enabled voice technology to enhance the customer experience at the fast-food chain’s locations. He said that even as budgets are tightening, the business case for this type of technology, which he believes will lead to productivity gains, is going to stand on its own.

“We’re pretty bullish about always trying to build a pretty rock-solid business case for technology. And if it’s there, and the market constricts a little bit, it’s still going to be there,” Mr. Vasconi said.

In a recession this year, he said, “I don’t think it’s going to be, ‘Let’s just go cut the tech budget.’ I think it’s going to be, ‘Hey, we’ve got to be more circumspect about what we spend money on, and let’s make sure that those are the things that are going to drive the business.”

Recent stock market performance has gotten people talking about a possible U.S. recession. So what are the leading economic indicators that have been solid recession trackers, and what can you do to prepare for a recession? WSJ’s Dion Rabouin explains. Illustration: David Fang

Write to Isabelle Bousquette at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Share this @internewscast.com
You May Also Like

Centralized USDC could decide the future of contentious ETH hard forks

Ethereum co-founder Vitalik Buterin says that centralized stablecoins such as Tether (USDT)…

Here’s What All Businesses Can Learn From This Convenience Chain’s Beloved Cup of Coffee

Opinions expressed by Entrepreneur contributors are their own. If you live in…

3 Ways To Get The Balance Right

Too much empathy can be damaging—but you can find the right balance.…

6 Questions for Tongtong Bee of Panony – Cointelegraph Magazine

We ask the buidlers in the blockchain and cryptocurrency sector for their…

Black Millennials Transform Brunch From Staid Buffets To Fashionable Insta-Worthy Day Parties

Dressing up on “Sunday Funday” and restaurant-hopping for chicken and waffles, endless…

De Jong Fan Treatment In Gamper Trophy Could Decide Player’s FC Barcelona Future

Frenkie de Jong could be treated badly by FC Barcelona fans today…

Pelosi’s Taiwan Visit Is Another Blow To Global Tech

TAIPEI, TAIWAN – AUGUST 03: Speaker of the U.S. House Of Representatives…

Matthew Stafford Injury Concern Looms Over Title Defense

INGLEWOOD, CALIFORNIA – FEBRUARY 13: Matthew Stafford #9 of the Los Angeles…