Government

Editor's Notebook: IT budgets and a tale of two CIOs

How the outlook is very different for the public and private sector

silicon.com editor Steve Ranger takes a look at differing fortunes of public and private sector CIOs in 2010.

If you made it through 2009 with your team, budget and career largely in one piece, well done.

You're probably feeling pretty good - and hoping that this year will offer some respite from the rounds of budget-chopping and headcount-slashing mayhem that kept everybody busy last year. You're probably thinking, too, surely 2010 can't turn into yet another annus horribilis for the IT department?

Already there are a few positive signals - CEOs and finance directors at tech and media companies predict the recession will end this year. But don't go looking for green shoots out in the snowy fields just yet - the very same executives don't expect real growth to start again until 2011.

Similarly, some of the CIOs and IT directors we've been talking to are cautiously optimistic about the size of their budgets this year. For some it's inspired by key projects that can't be held back any longer, while others are getting ready to chase new business as the recession finally comes to an end.

As the economy begins to chug along again, CIOs in the private sector are likely to see their budgets fare the best with spending by banks and other financial services organisations expected to rise first. For industries across the board meanwhile, if you can come up with some serious business transformation ideas (you've had long enough to think about them after all) then there might even be budget for that. So far, so good.

However, more so than in previous years, the contrast between private and public sector budgets will be sharp - painfully sharp if you are on the public sector side of the equation.

So spare a thought for the public sector CIO. Whichever party wins the looming General Election, government spending on IT will come under a hot, budget-shrivelling spotlight.

While each political party will beat their chests and insist they will protect NHS spending (and quite rightly so), don't expect any party leader to leap on a soapbox and guarantee spending on databases and servers anytime soon. Mainframes don't get the vote, after all.

Public sector CIOs will already be resigned to budgets being cut by 10 or even 20 per cent.

But while cost cutting may be an inevitable result of the gigantic deficit the country has built up, slashing IT spend may well be the wrong way to make the savings.

Smart use of technology is one of the few ways the government can improve services and bring down costs - cutting tech budgets could well save money in the short term but cost more over the next few years because of missed chances to innovate.

There are further implications to cutting public sector IT spending. Don't ignore the risk of an outflow of good public sector IT staff, frustrated by a lack of decent projects to work on, which could hurt government IT. Would this have a knock-on effect on the broader tech recruitment market, potentially driving down private sector wages as more workers compete for the same tech jobs? And as the government is the biggest spender on IT, what will be the impact of cost cutting on the tech industry in general and the economy at large?

Cutting IT spending might seem like a victimless crime for politicians but they should be aware of the broader consequences.

About

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

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