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By Mel Duvall
The worst of the recession appears to be over for the technology sector as most of the deep cuts have already been made, the president of the Society for Information Management (SIM) believes. But in an exclusive interview with CIOZone, SIM President Peter Whatnell says the effects of the recession have been more painful than at first predicted and the recovery may take longer than hoped.
In a wide ranging interview looking at the first six months of the year and the outlook for the second half, Whatnell says 2009 has been a painful year for chief information officers and the technology sector in general. Simply put, the depth and severity of the recession took most by surprise.
"When you look back at what people were thinking in the spring of 2008 through to December and January of 2009 - all of the indicators were turned around 180 degrees," says Whatnell. "I have not yet met anybody who hasn't admitted they were taken aback by how quickly things changed."
As a result, he adds, the actions that IT executives and businesses in general took were much more severe than might have been expected if spending was reined in over a six to nine month period. "I think we were caught up. The speed with which people reined in spending and started to cut was quite dramatic," he says.
Whatnell's own organization was no exception. Whatnell serves as CIO for Sunoco, a major petroleum refiner and marketer headquartered in Philadelphia. As the recession took hold the word came down at Sunoco that expenses needed to be trimmed by 20% across the board.
"The IT department was front and center in those reductions," adds Whatnell, "so we've suffered just as so many other companies have suffered."
To trim his budget, Whatnell began looking at more cost-effective alternatives, including what he described as consumer grade hardware and software products, as well as online software-as-a-service (SaaS) and cloud offerings, such as Web-based email. In addition, Sunoco went back to its major technology vendors to negotiate better deals. "We didn't put a gun to their heads . . . in a reasonably positive way we were able to say to them, 'look, we need to sit down with you and between us figure out a way we can reduce the cost of doing business.'
"It wasn't just a case of forcing them to reduce their costs. We wanted to know what it was in the way we conducted business that caused them to make their costs what they were, because we were very amenable to changing the way we did business."
In talking with other SIM members, Whatnell says that appears to have been one of the main strategies used to combat cutbacks - renegotiating contracts with vendors. Another primary method that appeared to be used was the scaling back or elimination of consultants and contract workers. "Unfortunately, it was very difficult to make the (required) cuts without impacting manpower," he says.
The good news is that based on conversations with SIM members, most IT departments have stabilized. The worst of the cuts are over and companies are carefully watching economic indicators for signs that the recovery is in full swing.
Those signs do not yet appear clearly visible.
Coming Next, The Forecast for the Second Half of 2009.
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