Technology leadership during an economic crisis

Businesses are looking to mitigate damage as a recession becomes likely and inflation trends upward.

Seven in 10 C-suite executives already have a cost-transformation initiative or plan to implement one within the next six months, according to an Accenture report which surveyed 2,000 C-suite executives.

Companies are strategizing ways to invest in technology that will increase businesses’ capabilities and awareness. Over half of respondents cited AI, cybersecurity, data analytics and other digital tools as a way to improve operations.

Technology — while costly — is a value driver and businesses do not want to be left behind with labor shortages, supply-chain disruptions and record inflation knocking on their door. 

“The first thing you do when you have an economic downturn is turn to the data,” said Taylor Brown, co-founder and COO of Fivetran. Brown said businesses look to what they can optimize, cut and reallocate. “You can't make those decisions without actually having all of your data,” said Brown.

A risk perspective approach relies heavily on extensive, viable data, according to Matt Kunkel, CEO of LogicGate.

“Siloed data and disconnected teams will undermine the resilience of any organization. IT investments, particularly in areas like enterprise risk management, bolster an organization’s resilience with robust processes and automation bringing disconnected data into one consolidated view so that stakeholders have visibility into all risk,” Kunkel said in an email.

Companies across industries turn to technology solutions to enhance or unlock new value. The city of Chicago put forth an initiative to modernize data access and IT infrastructure. Delta Air Lines signed a deal with AWS to broaden its cloud coverage. Nike is launching a new ERP system to increase visibility and productivity. 

But the continued market uncertainty has placed even more pressure on CIOs to evaluate cost optimization opportunities and practical investment options. 

“Amid the current economic uncertainty, CIOs face pressure to consolidate budgets, manage complexity across multiple systems and ultimately demonstrate the ROI of their technology investments,” Kunkel said.

CIOs have to advocate for these investments to the board, especially as many businesses pull back spending.

“CIOs that can identify key value chains and assemble KPIs that influence decision-making towards desired outcomes will have a strategic advantage in articulating the business value of IT investment,” James Anderson, Gartner VP analyst, said in an email.

Kunkel said that it’s important to clearly communicate the cost of failing to invest in enterprise technology properly.

“By putting a price on the efficiency automation brings or the enhanced protection of upgrading IT measures, CIOs offer the board a clearer picture of how the technology can benefit the organization and what they risk by not investing,” Kunkel said.

As CIOs chart a path forward, many vendors focused on emerging technologies will offer a lending hand, but not all are particularly necessary, according to Mike Tweedie, practice lead CIO-IT strategy at Info-Tech Research Group.

“Having a clear alignment with the goals of the business and the demands of their organizations, CIOs can target spending based on the underwriting, support, and successful execution of those goals,” Tweedie said in an email. “Gone are the days of a back office/shared service; CIOs must drive new technologies only in pursuit of business outcomes. As such, engaging key vendors and partners become critical and leveraging spending where and when it makes sense.”

The majority of businesses struggle to hire and retain skilled IT staff, fueling difficulties managing digital infrastructure, according to a June IDC report commissioned by Riverbed which surveyed over 1,400 respondents.

Eight in 10 IT managers struggle to collect and use relevant IT data, according to the survey.

Nearly three in five respondents agreed that senior staff spends too much of their time on tactical responsibilities. Additionally, over 60% of respondents agreed that leaders need to enable lower-skilled staff to fix issues. 

In many instances, a myriad of obstacles hinder the ability of IT teams to contribute to business goals successfully.

A mix of staff and tool challenges are the likely culprits, analysts say.

“IT departments are often stretched thin, especially in the current environment where it's hard to onboard and retain in-house talent,” Peter Tsai, head of technology insights at Spiceworks Ziff Davis, said. “As a result, many organizations don't have the resources to tackle more advanced projects.”

For teams with skilled talent, using inefficient tools leads to less job satisfaction and retention problems, according to Mark Leary, research director of network analytics and automation at IDC and author of the research report. 

Unsatisfied employees might search for opportunities with higher impact projects and the option to grow internally at other organizations. 

Companies that buy lots of tools but don’t use them efficiently and effectively create even more confusion for IT teams, Leary said. 

A Gartner survey found that over half of IT leaders regretted their purchase decisions. More often than not, dissatisfaction with tech purchases is a result of the buyer’s approach. 

While businesses are turning to technology amid market uncertainty, focusing on strategic investments and breaking down siloed data, many analysts have called for a more unified approach in tech departments to mitigate risks and improve operational efficiency.

Detailing who has tool access and why can smooth operation hurdles. For example, security staff may find value in accessing some of the information in a network analytics solution, Leary said. But the security team does not need the same amount of data as network operators or engineers.  

If an organization uses customized or role-based dashboards, an IT organization can present data that's valuable to the individual, he said. Building a data-sharing culture can help unify teams and break down silos. 

“That leads to more productivity, and subsequently, more satisfaction, because they're enjoying their work, they're learning more,” said Leary. “A networking person working with security persons is naturally going to develop some security expertise, that's expanding their knowledge base and their career opportunities.

Nearly nine in 10 companies surveyed for forthcoming Spiceworks Ziff Davis “2023: State of IT” report are planning for a recession in the next year, according to preliminary findings released Thursday.

While half of the nearly 1,500 IT decision makers surveyed saw spending cuts on the horizon, 51% said enterprise IT investments will increase over the next year and only 6% are expecting a decrease.

“In the face of uncertainty, investing in IT, investing in modernization and investing in improving technology capabilities really paid off for businesses [during the pandemic],” said Jim Rapoza, VP and principal analyst at Aberdeen Strategy & Research, during a LinkedIn Live webinar on Thursday.

A majority of respondents were already expecting a recession when Spiceworks Ziff Davis, a software company that includes the marketing intelligence company Aberdeen Strategy & Research, fielded the survey in June. But the prospect of two consecutive quarters of GDP losses, which have since come to pass, hadn’t dampened enthusiasm for tech spending. 

Drawing on lessons learned during pandemic-induced economic contractions, companies plan to grow IT budgets by an average of 21%, while reducing costs elsewhere, according to the preliminary report. 

Economic contractions are concerning but not unprecedented.

“When you think of recessions, it can seem scary, but it’s pretty commonplace,” Rapoza said. The US experienced recessions in 1990, 2001, and for 17-straight months beginning in December of 2007. A pandemic-induced recession lasted for only two months in the spring of 2020, according to the National Bureau of Economic Research. 

“April, May and June of 2020, that was the Mount Everest of fear, uncertainty and doubt,” said Rapoza. 

Yet, companies that invested in IT and followed through with infrastructure upgrades weathered the storm by pivoting to remote work, moving customer service off-site and reaching consumers online. 

“It really brought the profile of IT up in those businesses that might have looked at it as sort of like plumbing or maintenance,” Rapoza said. “Now they look at IT as, they kind of saved our bacon in 2020 and 2021.”

The preliminary findings align with Gartner projections that show cloud spend growing by more than 20% into 2023.

Four in 10 respondents surveyed by Spiceworks Ziff Davis found savings in overall IT spending thanks to previous modernization investments. Improved security was cited by 45% of respondents as another key benefit of greater investment, according to Rapoza.

Communicating the business value of IT spend to other stakeholders should be a priority for CIOs and other tech leaders, according to James Anderson, VP analyst at Gartner. 

“There’s probably lots of CIOs out of work over the last couple of years that couldn’t articulate the business value of the IT story,” Anderson said.

For many companies that successfully weathered the pandemic, relying on IT is a big part of that story. 

“If a hurricane is coming, you don't get rid of your generator,” Rapoza said. “You buy a better one.”

Tory Brown was reasonably happy in his third year as an IT help desk engineer at Privia Health Group when a recruiter contacted him in May. The Hive Group, a government contractor headquartered in Ashburn, Virginia, had an offer with greater responsibility and a roughly 15% salary bump. 

“I wasn't looking to leave Privia, but if the right opportunity came along, I was going to have an ear open for it,” said Brown, who earned his bachelor’s degree in communications in 2013 and completed a CompTIA A+ certification before entering the IT workforce in 2016. 

Money wasn’t the only reason Brown switched jobs — but it didn’t hurt.

“I was a little antsy: I wanted to learn more, and I wanted the possibility of earning more,” he said. In addition to a higher salary, Hive is paying for the continuing education credits Brown needs to renew his A+ certification and earn two additional CompTIA credentials (Network+ and Security+), as well as Microsoft and Linux certifications.

Brown’s experience reflects a larger trend in the market for tech talent. Across the board, salaries in tech professions have risen 6.9% in the past year, with some positions — including web developer, technical support engineer and database administrator, and data analyst — leading the pack with double-digit growth, according to a survey by IT career marketplace Dice.

“This is the largest percentage increase of any year in the history of our survey instrument,” said Art Zeile, CEO of DHI Group, Dice’s parent company. 

While unprecedented in scale, the spike in salaries is rooted in the most basic of economic principles: supply and demand. 

IT upgrades and build-outs put on hold during the pandemic resumed in 2021. Companies committed to larger, more aggressive investments in tech that helped overcome disruptions of the previous year — AI, analytics, automation, cloud. Meanwhile, the supply of talent to implement, operate and manage these technologies did not keep up with demand. As competition for talent increased, so did salaries.

While the surge may level off over the next year, salaries are expected to remain high.

Wages for tech workers were already on the rise, according to Bureau of Labor Statistics data and CompTIA’s annual State of the Tech Workforce report. The median wage in tech rose to $94,058 in 2020 from $86,852 in 2019, an increase of 8%. 

Some of that increase is due to organic growth rooted in modernization efforts underway pre-pandemic, according to Tim Herbert, CompTIA chief research officer. But that’s not all of the whole story. Postings for open tech positions were up 62% from June of last year, according to CompTIA’s June 2021 jobs report. 

There are simply more companies hiring, and there's more technology used across business functions,” Herbert said. “That translates to a need for more workers.” 

Great resignation, great reshuffling or great reflection?

The simple math makes sense. More technology requires more tech workers. This accounts for an expected gap between a relatively stable supply and growing demand for talent. Complicating matters are reports of a Great Resignation and the possibility some workers are opting out altogether.

With 80,000 tech workers added in 2021 and another 178,000 projected this year by CompTIA, it’s clear the workforce isn’t shrinking. The resignation, Herbert said, is more likely a great reshuffling, as tech workers are lured away by the promise of larger salaries.

CompTIA saw an uptick in the number of tech professionals exploring and/or considering new job opportunities in the past year. But, rather than leaving tech, they appear to be looking for better jobs within the field, according to Herbert. 

A “great reflection” is the term preferred by Lily Mok, Gartner VP and analyst. As more jobs come on the market, there are more choices, prompting workers to reexamine their level of job satisfaction.

“It's not just about pay, but also the whole experience associated with growing your skills and getting what you need for your personal interests and career path,” Mok said.

As companies institute return-to-office policies, some tech workers are looking for jobs that offer more flexibility. Windowed work, which gives employees latitude in scheduling their day, has become a more common perk, according to Brittany Nisenzon, a Philadelphia-based metro market manager for talent recruitment and HR consultant firm Robert Half.

In short, it’s still a job hopper’s market. 

There almost certainly are plenty of help desk personnel eager to move up the IT ladder. 

“I have friends that I left on the service desk at Privia who are now more willing to look for new jobs because they know that these jobs are out there,” said Brown. “Some of those jobs will just come across your path, like mine did.”

A leveling effect

Growth and demand patterns are typically asymmetrical in tech, varying by geography and sector. However, salaries are experiencing as much and, in some cases, more growth in emerging tech hubs, according to the Dice report. 

In Seattle, for example, salaries were up 11.2% in the past year, a rate exceeded by Pittsburgh (14%), Atlanta (13.9%) and Miami (11.4%).

The option of working for a company in a tech hub while living in a city with a relatively low cost of living is one potential benefit of an environment — and an economy — that supports remote work.

“When a remote technologist in Kansas City is being paid a comparable rate to their teammate in Portland, [Oregon], that could help close the ‘geography gap’ that’s existed for several years, where technologists in mature — and expensive — tech hubs such as Silicon Valley and New York City earn quite a bit more than their professional colleagues with similar skills in other cities,” said Nick Kolakowski, senior editor of Dice Insights.

Similarly, salary increases have taken hold across the tech workforce.

DHI Group tripled its recruitment contract with Amazon in the first quarter of 2022, according to Zeile, but the majority of its clients are not in the tech sector. 

“Companies like Disney, Bloomberg, and Home Depot, they’re all trying to hire technologists in large numbers,” Zeile said. 

A salary plateau on the horizon

Workforce growth in tech was projected to be roughly 2% this year by CompTIA, and Herbert said he is still comfortable with that number. A dip or, more likely, a period of plateauing as a normal part of the business cycle would align with that analysis. 

With rising inflation and interest rates fueling recession fears, the unemployment rate for tech workers rose to 1.8% last month, according to a CompTIA review of Bureau of Labor Statistics monthly data. 

Some analysts have begun scaling back 2022 growth projections. The IT consulting firm Janco Associates has updated its estimate for tech jobs added this year to 196,000, which would constitute a drop from 213,100 in 2021. 

But many companies already set modernization plans in motion. A growing tech workforce will be needed to see those plans through and, currently, the tech workforce can’t meet that demand. America needs a larger talent pipeline.

The number of graduates from bachelor’s and master’s programs in computer science has grown steadily over the last several years, to nearly 150,000 in 2021 from just over 100,000 in 2016, according to an analysis of Department of Education’s National Center for Education Statistics data. But that’s not enough.

Sourcing IT talent from overseas could expand the pool of candidates, but there are short-term obstacles. Restrictions imposed in 2020 on the H-1B visa program, which could ease some of the pressures, remain in place.

“We're still in the same fundamental position where we're not producing enough tech talent in the United States, and we’re not able to import it from overseas,” Zeile said. “That supply-demand gap is creating this pricing pressure.”

That pricing pressure is likely to keep salaries high through the end of the year.

Unemployment among tech professions fell to 1.7% in July, according to a CompTIA review of U.S. Bureau of Labor Statistics data. The number fell one-tenth of a percentage point month-over-month and is close to the all-time low rate of 1.3%, recorded in May 2019.

Amid job gains in the economy overall, which more than doubled expectations, tech occupations expanded in July, with employers across industries adding an estimated 239,000 positions. The previous month saw the economy shed 17,300 tech positions as hiring cooled.

Hovering above the historic low by less than half a percentage point, the IT unemployment rate was half of the national average, which was 3.5% in July, according to BLS data. 

Two consecutive quarters of GDP contraction haven't kept employers from hiring — particularly struggling to fill tech jobs amid scarcity.

"Despite some of the layoff announcements and some of the other [economic] concerns, it is still an extremely tight labor market for tech talent," said Tim Herbert, chief research officer at CompTIA.

Software developers and engineers topped the list of in-demand tech positions, with employers looking to fill nearly 148,000 positions in this category during July. 

"Tech is now so embedded in businesses that, even when we have periods of economic weakness, it typically does not translate to a pullback in tech hiring," Herbert said. 

With macroeconomic conditions in mind, a handful of big names in technology paused hiring or laid off workers. Google internally announced a two-week pause in July to readdress its hiring strategy. Microsoft cut open jobs in specific groups, while Oracle reportedly began laying off workers in its customer experience division. 

"Headlines about increased layoffs have been constantly in the news in recent weeks, but the data from July continue to show depressed rates of job loss," wrote Nick Bunker, economic research director for North America at the Indeed Hiring Lab in a blog post Friday. "About 1% of employed workers moved into unemployment over the month, which is barely above its June rate." 

Layoff rounds might signal to the market that companies are paying attention to their bottom line amid economic headwinds, said Herbert. Companies "don't want to be the outlier in announcing that they're hiring when everyone else is pulling back." 

For employers looking to retain their workforce, addressing company culture and supporting internal training is key.

"Today's employees want to work for a company whose values align to their own," Gina Hartigan, chief people officer at Kantata said in an email. "In an industry that is continuously evolving, employees value organizations that keep up with technology advancements and provide opportunities to continue their education."

Even the most upbeat economic projections for the second half of the year have ominous overtones.

With inflation rising at its fastest rate in four decades — 9.1% in the last year, according to the latest BLS Consumer Price Index Summary — the Fed is expected to bump up interest rates by another 75 basis points at its July meeting next week, the Wall Street Journal reports.

Talk of recession is echoing throughout boardrooms, too.

Pressure to rein in budgets while adding IT assets puts CIOs in a particularly tough spot. Infrastructure costs are difficult to trim. “There’s large capital expenditure in IT,” said former New York University CIO Len Peters, faculty director of the school’s new CIO executive training program. “50% to 60% of your spend is on people. The rest is on things.”

Cultivating better communication among stakeholders and a more decisive culture around enterprise technology purchases are important steps CIOs can take to get the most out of capital expenditures, according to a Gartner survey of 1,120 IT leaders and managers involved in large-scale acquisitions over the last two years.

Most of the buyer groups in the Gartner study consisted of eight to 15 people, and two-thirds of those involved in the decision process were not in IT. Disagreement over key objectives and a tendency to vacillate, stall and face objections by occasional decision makers led to buyer remorse in 56% of the purchases studied.

As a result, high-regret buyers took up to ten months longer to make purchasing decisions than those with no regrets.

“Many organizations assume that we all understand how to make a good collaborative decision,” Gartner Distinguished VP Analyst Hank Barnes told CIO Dive in an email. “That is a bad assumption.”

To avoid the pitfalls of a cumbersome decision process, CIOs should proactively articulate IT goals and work toward forging a consensus on those goals, Barnes said.

Economic downturn raises the stakes for purchases, but it hasn’t dampened enthusiasm for tech upgrades. Demand for the proven efficiency gains and competitive advantages promised by AI, automation, cloud and data persists, as businesses turn to tech for operations optimization and CEOs prioritize modernization.

The challenges for CIOs are manifold. Efforts to recruit — and retain — tech talent are bumping up against a tight labor market, hiring freezes and, at some companies, layoffs.

The right talent is key to modernization success. Yet, companies increasingly lack tech personnel, according to Lance Phillips, VP of customer success at DevOps company CloudBees.

“What you have is this really interesting confluence in the industry where companies are trying to hold onto cash and technical people have been pulled out of the equation,” Phillips said. “Complex things are harder to get done.” 

Stronger tech leadership leads to better decisions in personnel and purchasing, and tech leadership is the CIO’s job.

“You have to think of yourself as an executive leader,” said Christie Struckman, VP analyst at Gartner. “Your technology earns you a seat at the table, but what keeps you there is your impact on the enterprise.”

Communication is also key, Struckman said. “If you want to influence the operations lead to do something, that’s great: create your deck without a word of technology in it.”

Consider the CIO's laundry list: Migrating to the cloud, cybersecurity solutions, deploying the latest AI/ML technologies, UX/UI and agile. They're just a few of the never-ending tasks before the technology department.

Each upgrade requires people with the knowledge, ability and experience to execute strategic plans while maintaining day-to-day IT operations.

Modernization, it turns out, is really a people problem.

“Ask any company leader right now, what's the biggest challenge you're facing? They all say talent,” said Dr. George Westerman, senior lecturer at MIT’s Sloan School of Management and moderator of a panel on talent recruitment and retention at last month's MIT Sloan CIO Symposium.

In the face of the Great Resignation and pandemic-related disruptions, Westerman’s question — and its implicit answer — begged further questions about what tech companies and organizations on the pathway to becoming fully digital can do to address shortages of crucial skills and talent.

The solutions may require CIOs and other tech leaders to forge stronger working relationships with HR departments, and to adopt more of an HR mindset regarding workforce planning.

“Most of my conversations start with clients saying, ‘Listen, I'm having a really challenging time with recruiting and hiring people,’" said Suman Thareja, partner at McKinsey & Company. "As I unpack that, I find workforce planning starts to emerge as the crux of the problem." 

"A lot of executives don't necessarily know the extent of the gaps they have between the skills they have today and the skills they need in the future,” she said.

Looking inward

As the cost of recruiting in-demand tech talent has gone up, company leaders have turned to upskilling initiatives to fill tech workforce gaps. But the challenges in workforce development are manifold, from matching trainees with specific teachable skills, to designing effective training programs that combine instruction with on-the-job mentorship.

A commitment to upskilling also requires CIOs and other C-suite executives to nudge HR departments away from a recruitment-centric mindset that undervalues the potential of in-house talent.

“We mined a whole bunch of data where we looked at what HR actually does with its days, and HR spends about three times as much time on talent acquisition as it spends on all of talent management,” said Melissa Swift, U.S. transformation leader at the consulting firm Mercer.

Given the current imbalance in supply and demand for technology talent, recruiting efforts can be akin to casting a line into an overfished reef. The time and effort spent in hiring, coupled with salary inflation for sought-after engineering and programming skills, adds up to a significant capital investment for many organizations.

"Definitionally, anyone new you hire is going to cost more than the people you have," Swift said in an interview with CIO Dive. "The other piece is that if you want a diverse population of people with emerging skill sets, you are generally much better off retraining your own folks."

Workforce development starts, and ends, with retention

Upskilling requires cross-departmental coordination; IT leaders know their staffing and skill needs, while HR professionals bring workforce development experience to the table. 

“HR supports us with the tools, with the programs they have,” Wafaa Mamilli, EVP and chief information and digital officer at Zoetis, said on the panel. “But it can’t just be an HR function.”

Zoetis, the world’s largest animal pharmaceutical company, has met this challenge by implementing an enterprisewide digital fluency program and a guild system where employees can earn badges in various technical areas.

“Companies mostly do a very good job at developing top talents. We do an okay job of taking care of those who are underperforming. It is the full middle that tends to be 90% or 95% of the portfolio population in any organization that we have neglected in the past,"Mamilli said. "We're now paying the price.”

Comprehensive workforce development has multiple benefits. For companies that foster a learning culture, upskilling represents a steady talent pipeline. Training programs can improve workforce morale, increasing workforce retention.

This can have a particularly potent impact on new hires, said Mamilli. Retention is more of a problem with new employees than with those who have been with a company for 15 to 20 years.