5 Tips for CIOs Looking to Curb Costs Before a Recession

by | Aug 23, 2022 | Industry

IIt is a word we have not heard much about since the dramatic economic downturn based on the dramatic housing implosion of 2008. Yes, it is the R word, as in recession, and it has CEOs and CIOs across the industry spectrum worried about the financial health of their companies as we approach the final quarter of 2022.

According to the C-Suite Outlook Mid-Year recently released by The Conference Board, nearly 80 percent of CEOs polled expect a recession has already started or will start within the next 12 months. Dan Roberts, who is the president of Ouellette & Associates, spoke about the unpredictability of recessions developing during a recent podcast. “While recessions are inevitable, we never know when they will hit,” Roberts said. “There is a tricky balancing act at play. C-suite leaders can’t hit the brakes and risk missing market opportunities. But on the flip side, if they continue to invest at the same levels and the economy tanks, they run the risk of spending getting out ahead of revenue.”

As hit the 14-year mark since the start of the last recession, CIOs have become much more involved in leading their companies through challenging economic periods. This means CIOs should be proactive and start deciding on how to cut costs before the next recession hits.

1) Hire Independent Contractors for Projects

The first place on a balance sheet where executives often look to curb costs concerns variable expenses such as labor. When revenue starts to decline, companies start laying off the most expendable employees to cut costs. However, a recession does not mean every IT project managed by a CIO comes to a standstill. In fact, most IT projects can remain active if CIOs turn to temporary IT professionals to fill the employment void.

As a CIO leading a company through a recession, you can reduce labor costs by hiring qualified independent contractors to work on certain projects. If your company experiences a backlog of open positions, remove the positions for the time being from career sites until the economy starts to rebound.

2) Return to a Remote Workplace

The COVID-19 pandemic placed more pressure on CIOS than any other executive position outside of the CEO. CIOs had to adapt rapidly to the new normal called remote workplaces. They have to establish effective security protocols for electronic components located across a large area. Monitoring productivity also required implementing a new model. After a year into the pandemic, CIOS that got ahead of the new remote workplace helped their companies grow sales under extreme economic duress.

CIOs discovered that going remote or following the hybrid workplace paradigm saved their companies money because of a decline in the use of energy. With offices closed, water, security, and electrical bills all substantially decreased.

3) Adjust IT Service Contracts

CIOs automatically renew many IT service contracts because of the familiarity they have with providers that deliver optimal service. However, before the start of the next recession, revisiting each IT service contract is a good idea to control expenses.

As the managing partner in advisory and transformation at West Monroe, Marc Tanowitz says,  “Providers that can deliver demonstrated, quantifiable, financial value can and should continue to be rewarded by their clients and customers, as this is key to successful growth in a recessionary environment. That said, buyers need to be sure that their value-added partners are financially strong and are not at risk of decreasing their investments in their products and services to the point that performance and quality can suffer.”

Work closely with external partners such as IT service companies to find ways to save money for both companies. IT service companies should find themselves in the same cost-cutting mode as your company. You can restructure an IT service to decrease costs, instead of eliminating what has been up until now a valuable service for your company.

4) Close Redundant Systems

Before a recession hits represents the best time for a CIO to conduct a comprehensive audit of the base of assets called hardware and software. You might discover opportunities to lower costs, especially if some of the assets are nearing the end of their lifespans or have reached the end of their lifespans. Redundancy can chew through an IT budget quickly, as older systems do not get shut down as newer, similar systems go online.

CIOs must ensure that eliminating redundant systems makes financial sense. If you deactivate a system that is continuing to depreciate, your company takes a hit on the balance sheet. Working with the CFO or a team member designated by the CFO helps you identify the IT systems that still retain some value before depreciation.

As one example, take a look at 5 Costs of Legacy ERP.

5) Move IT Functions to the Cloud

An economic downturn that adversely impacts your company might not seem like the right time to make infrastructure changes to your IT platform. Nonetheless, you should consider making IT infrastructure changes long before the next recession hits your company hard. The most significant infrastructure change involves moving many of your IT functions to the cloud.

The primary benefit of moving IT functions to the cloud is to gain the ability to scale both vertically and horizontally to account for positive and negative economic circumstances. This means you can quickly adjust your IT functions to address an economic downturn, and then ramp up the number of IT functions as the economy begins to recover. Moving your company’s IT functions to the cloud also allows you to gain a clearer picture of data analytics, which includes determining the buying habits of your customers and how the habits change during a recession.

Learn more about cloud discovery & assessment.

Get Ahead of a Recession

Getting ahead of a recession can help CIOs keep their companies financially afloat until the inevitable recovery brings a return to strong financial health.


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