IT Cost-Cutting Won't Sit Well with Dissatisfied Staff

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With labor-related costs accounting for such a big chunk of IT budgets -- up to a third by some accounts -- it's no wonder that companies are looking to control these expenses. Twenty-five percent of CIOs responding to a survey on cost management conducted by CIO Insight in July told the publication they planned tocut staffing costs.


Drilling down further, the survey showed that hiring freezes -- mentioned by 60 percent of respondents -- were the most popular means of reducing labor costs. Interestingly, this result doesn't mesh with a bevy of surveys that indicate that CIOs planned to add staff this year.


In its Mid Year 2007 IT Salary Survey, for instance, Janco found many companies, especially mid-size enterprises, planning to hire. Earlier this year, Computer Economics predicted that 2007 would be the biggest year for IT hiring of the past decade, with more than half of all companies expected to increase IT staffs by 5 percent, and 25 percent planning to increase headcounts by at least 15 percent.


Thirty-seven percent of the CIO Insight respondents, in fact, are using layoffs to cull their staffs. Perhaps this is a case of companies hiring to boost their IT ranks in areas perceived to yield the biggest impact to revenue growth, while cutting back on the more basic services that tend to be offloaded to outsourcing firms.


This trend was noted in a Chicago Tribune story from July of 2006 that found growth varied widely among IT occupations. While the number of software application engineers grew by some 26 percent between 2001 and 2005, according to an American University study, the number of computer programmers dropped by 22 percent.


One way for companies to get the desired blend of job skills is with internal training efforts, an approach used successfully by insurer BlueCross Blue Shield of South Carolina, which began a training program for entry-level IT workers in 1997 to tweak the skills IT grads learned in school and to deal with an expected wave of retirements.


Unfortunately, 25 percent of the CIO Insight respondents mentioned reducing training as a cost-cutting strategy. Other strategies mentioned by respondents: limiting travel (56 percent), which may become even more popular as videoconferencing technology improves and costs drop; limiting bonuses (22 percent); delaying raises and decreasing benefits (16 percent each) ; and cutting salaries (2 percent).


It seems inevitable that these results may not sit well with IT staffers who, according to a recent Network World survey, are not all that satisfied with their financial compensation.