Without question, 2023 will be a challenging year for CIOs and the enterprises that they support. Agility will be critical as the impact of economic tailwinds become clearer. CIOs will likely need to be able to do some trimming but also not slow down high-priority initiatives focused upon transformation or building a data-centric business.

With this said, how are CIOs reading the tea leaves for 2023 and what choices do they expect to make?

Biggest Challenges to IT Strategic Plan

Market analyst Dion Hinchcliffe says from his research the biggest challenges for the 2023 plan will be the following:

  • Uncertain operating conditions including the economy, supply chain and talent.
  • IT budget hedging and cloud costs.
  • How big to go on disruptive strategic technology including AI.
  • Cybersecurity and ransomware level of focus.
  • Environmental, social and governance.

Given this, it comes as no surprise that former Verizon CIO Ben Haines says, “CIOs have to know which levers to pull should cost cutting need to occur.” Ed Featherston, Enterprise Architect for Thermo Fischer adds, “cost cutting/control/minimize spend will be the theme across most businesses due to inflationary concerns.” As well, he fears, “there will be strong push for tactical vs strategic spending.”

Former Iron Mountain CIO Ken LeBlanc, however, says, “I would not refer to it as cost cutting, rather tightening and a focus on non-discretionary and truly differentiating expenditures. Those that cut mindlessly will come out the other end weaker.”

Without question, there continues to be uncertainty about how 2023 will pan out. New Zealand CIO Anthony McMahon, for example, believes “it will go the way of 2020, 2021 and 2022, all evolved.” Martin Davis agrees and says, “it depends on whether you believe there will be a recession, many of the economic indicators in the US still disagree. I think the normal rules still apply. So how do we make best use of the budget available to support strategic initiatives and add value to the business.”

And as CIOs have become increasingly focused upon business models and corporate value propositions, it is uncertain how spending can be easily eliminated. Miami University CIO David Seidl says, “for me, it is the backlog of strategic work from the height of the pandemic. There is so much that needs done. At the same time, we are continuing to fight a tough IT labor market, supply chain bumps, and of course the potential for recession combined with inflation making budgeting and planning challenging.”

So, in planning Capgemini Executive Steve Jones says CIOs should align to the business strategic plan and show how IT is relevant to the plan. All too often IT’s strategic plan isn’t strategic, it’s what IT wants to do.” Michigan State University CIO Melissa Woo agrees and says, “the discussion should not be about cost-cutting but instead about prioritizing where to apply resources and reallocating resources to higher value activities.”

Related Article: Why — and How — CIOs Support Customer Experience Programs

In Recession, How Should the 2023 Plan Change?

Seidl is clearly right when he suggests, “everything depends on the depth of the recession. We may need to adjust timelines for some efforts or pause them, but others will continue because the cost of not doing them in a timely way exceeds the savings from pausing them due to financial changes.” Davis is correct in saying, “there will be an increased focus on short term value and efficiency.” With this said, Hinchcliffe suggests that top priorities will not change much, except even more advanced automation.” What he believes gets reduced is “work on employee experience, lower priority SaaS subscriptions, duplication, overprovisioning cloud/licenses, and device upgrades.”

Featherston, however, worries about “businesses that knee jerk reactions and go fully tactical. Those that do not do this, will come out better in the end.” There is impressive supporting research that says that organizations that do this do worse in a recession and come out weaker afterwards. Seidl says that he has seen organizations do the opposite, set the stage for really impressive gains on the way back out of the recession. And this matters, says Featherston, because in a rapidly evolving technology landscape, losing six months’ time can leave you in the stone age quickly.

Hinchcliffe agrees and says, “the challenge is that as digital business and economy are becoming a larger share of revenue. Bezos and the seven years to exit average of technology unicorns have proven it must be a long-term strategy. Or do not play.” But at the end of the day, Jones says, “if the business strategic plan changes, IT needs to pivot. If you do not already have pivots points built into your 2023 plans, then you are baking in failure. The IT plan has to adapt to the business reality. There is no other way.”

Dealing With a Changing Economic Climate

CIOs are clear they are planning for a changed economic climate in 2023. Financial Services CIO Dennis Klemenz says, “an obvious revisit of budget and usage. IT budgets can have a lot of bloat without business impact. Better to cut those than cut people but so many businesses go after people first.” Similarly, Grand Valley State CIO Miloš Topić says, CIOs should “focus on talent, clear priorities, unified commitment, courageous leadership, playing the long game.”

McMahon says, “CIOs should focus upon initiatives which make the organization more effective, reduce costs and grow revenue. Anything that removes high-volume-low-value-work from expensive resources allowing them to focus on high value activity is a good starting point.”

Meanwhile, Arts and Wellness CIO Paige Francis says in the mix of this it is important to focus on people — not just yours if you are a communicative, empathetic leader. You should spread the care everywhere.” And learned from managing through COVID-19, Francis says, “help where can you add value without carrying everything.”

Learning Opportunities

Related Article: CIOs Examine the Inevitable Marriage of Customer and Employee Experience

Does the Timeframe for Payoff Change in the Recessionary Plan?

According to Davis, “many would target that, but you have to be careful not to focus on short term band-aids over strategic improvements.” Jones is more specific and says, “it depends on what is being asked, the timeframe for cost rationalization may well be shorter, the timeframe for value creation might need to be longer. But the biggest risk is just running after targets without understanding its impact on the destination.”

However, Hinchcliffe adds that for digital transformation, “the timeframe for payoff for digital initiatives should not shorten.” The focus for IT is now about business models and value propositions, how can disinvesting even be a discussion? Seidl answers, “because IT still looks like a cost center in many organizations, and folks are very quick to forget how much they rely on it. At least, historically, that's a familiar cycle, and we're still all human.”

Can You Really Slow Down Digital/Data Investments?

Davis agrees this is a bad idea. But I have seen businesses make knee jerk decisions that caused long term problems.” Having said this, Davis says, “the obvious answer is no, however, the real question is: Does the leadership team really believe in digital transformation? We will all find out very soon.” Adding on, Featherston says, “organizations need to evolve or risk extinction, because competitors will evolve and jump forward.”

Does the notion of cash a cow make sense if it ever did?

Hinchcliffe adds that “since digital is central to the future, there should not be real cuts here.” But with this said, McMahon claims that “organizations should constantly review strategic investments to make sure they are on track. Putting the blinkers on and pursuing a strategic intent can be as dangerous as stopping.”

Featherston claims that organizations should not just blindly go forward strategically. They need to understand risks and rewards and make informed decisions. In this process, Jones says that is a good exercise to make sure the organization is “focusing on what is actually required and remove the ‘nice to haves.’ It is a great idea to use minimum viable products, which is a better way to drive transformation. For example, how about spending on data and AI to drive and optimize outcomes rather than that great big package re-implementation which would have sucked up huge budget for costs to stay in a similar place.”

How Can Partners Help Better Navigate a Recession?

Hinchcliffe says, “in the technology world, organizations that partner with savvy orgs do far better than those without strong effective partnerships. Every organization needs a more digital-ready partnership program that is funded and prioritized. Doing this will become a driver of growth and resiliency.” Seidl adds, “I have spent a lot of my career working with CFOs and budget folks. Here I have work to move them away from historic funding models. This includes chargeback processes that do not align to modern IT models.” Meanwhile, Jones says, “if a software vendor won’t license based on metrics that will go down if business reduces, only up when your business increases, then that vendor has no skin in the game.”

Parting Words: Business Efficiency, Improvement, ROI

I really like the summary provided by CIO Pedro Martinez Puig on the expected recession, “driving strategic cutting in technology budget is worrisome. When IT units deliver more reducing costs ('their pound of flesh') than producing value via new projects is a long-term signal that the model is going off the rails. CIOs should focus on business efficiency, continuous improvement, and business ROI.”

As CIOs and their organizations go forward in 2023, they should be agile and have multiple plans depending upon how the year ended up. Do we end up in recession or slower growth?