Sluggish growth, economic slowdown, or outright recession: Whatever you want to call it, the economic news the past couple of months has been unsettling, to say the least. I hope it won’t get much worse or last too much longer, but no one really knows.

As a result, organizations are looking for ways to save money and reduce their discretionary spending. Those sounds you hear in the distance are the platoons of financial analysts pounding away on Excel spreadsheets, looking for line items to cut.

Guess what? When the analysts get to the IT budget, they smile the way Grandpa used to smile as he sharpened the carving knife and prepared to go to work on the Thanksgiving bird.

In today’s column, and for the next couple of weeks, we’re going to look at what the slowdown in the growth of IT budgeting means for you, the technical manager. These columns are part of a larger series here at TechRepublic, called Doing More with Less. In this series, we’re providing information and analysis you can use to stretch your budget.

Setting the stage
Right now, let’s focus on the magnitude of the budget challenges confronting the average IT manager. Next week, we’ll focus on some strategies for meeting these challenges.

First, here’s some good news. In most cases, the IT budget cuts are reducing the rate of growth, not actually cutting the aggregate IT spending. In other words, more organizations are planning to spend more on IT in 2001 than they did in 2000. The difference is that they aren’t planning to spend as much more as they thought when they first drew up their budgets.

In other words, while things might be tight for the next few months, the sky isn’t falling—at least, in most places.

That’s the good news. The bad news is that most IT managers have never managed in this kind of economic environment before. Here are some of the challenges you may face in the next several months:

  • Your consulting budget may take a huge hit. When companies look to save money, they start with discretionary spending, such as marketing or consulting budgets. Rather than start with layoffs or hardware or software spending that may already be in the works, financial analysts will point to consulting dollars as a prime target. This means that you may have to cancel contracts with in-house consultants. While the CFO may not consider that a layoff, the consultants will, and it won’t be any fun for you.
  • You may need to cancel planned projects that haven’t started yet. Again, when deciding what gets funded, projects that are in midstream are likely to get priority over projects that haven’t been launched.
  • You may have to stretch out existing projects or deployments. In the same way, the U.S. Department of Defense tries to save money by spreading out the deployment of new weapons systems (trading a lower annual cost for a higher total cost). You may be forced to do the same thing with some of your deployments.
  • You may have to deal with morale problems. As spending gets trimmed, your staff may become demoralized and start looking for other offers.
  • You may not be able to afford to counter an offer. In the past, IT managers could often counter a salary offer made to a star performer, on the grounds that it was cheaper in the long run than having to pay for a replacement search. In today’s economy, you may be contending with an HR-mandated freeze on hiring and salaries, and you may not be able to counter any offers.
  • You may have to reduce staff. Let’s hope it doesn’t come to layoffs, but it may. We’ll talk more about this in a future column.

What’s next?
That makes for a pretty grim list. As I said, we’re going to be talking about this for the next couple of weeks. Now that we’ve discussed some of the situations you may encounter during this period of economic uncertainty, we can turn our attention to ways that you can survive (and even thrive) when times are tough.

See you then!

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