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Economic downturn affecting IT staffs

(Mar. 12, 2001) In the face of an economic downturn this year, many IT managers say their staffs are protected islands within increasingly cost-conscious corporations. Even so, they're tweaking staffing plans, initiatives and investments to reflect looming economic concerns.

Microprocessor and memory-chip maker Nu Horizons Electronics Corp. is forging ahead with new projects, such as implementing initiatives from the industry consortium RosettaNet and building an online component design system that integrates with supplier portals.

No Recession Here
Rob Kogan, vice president of MIS at Nautilus Insurance Co., a general liability and property insurance firm in Scottsdale, Ariz., said his IT budget has increased 300% over last year’s.
“We just hired two more [programmers],” said Kogan, who will use the budget increase to expand electronic insurance distribution systems, back-office processing and customer profiling capabilities.
Still, Alon Sanie, business-to-business and Internet development manager at Nu Horizons in Melville, N.Y., said economic concerns in the PC market have put downward pressure on IT salaries.

"We're going to be more conservative on hiring, but there will be no cancellation of projects," said Sanie. "We'll hire more beginning-level programmers and less of the high-end people that command higher salaries. It's cheaper to train them on the exact systems we need and then get them up to speed quickly."

The fear of a recession is affecting IT spending and staffing plans, said users attending the Applications Strategy Conference here last week hosted by Giga Information Group Inc. It also increases the pressure for quicker payback from IT initiatives.

"There is some hesitation, but not necessarily a downsizing of IT," said Randy Heffner, an analyst at Cambridge, Mass.-based Giga. "Decisions are being taken more carefully and stringently."

"We provide a commodity, and the price is set by the marketplace, so the one area that we can control and manage is our cost structure," said Brian Neely, chief technology architect at Phoenix-based Phelps Dodge Corp., the world's second-largest copper mining company.

As a result, Phelps Dodge intends to focus on existing long-term projects such as Quadrem, the business-to-business exchange in El Segundo, Calif., that it helped launch in November. But the company plans to keep its IT hiring "static," Neely said.

Rather than bring in new hires to expand the collaborative aspects of the exchange, Neely will move IT staffers off of less-strategic application development projects.

"We have some projects that have been very tactical that are finishing or getting implementation rolled out, so there will be resources that will be freed up that we'll use," he said.

Raising the Stakes

Some corporations are upping the ante on IT initiatives, if not staffing, in the hopes that these strategic bets will provide big payoffs in the form of staff cuts elsewhere during the economic downturn.

San Francisco-based Wells Fargo & Co., for example, is forging ahead with an aggressive IT strategy that includes infusing its business units with new workflow functions and expanding its Web banking offerings.

IT projects such as these take on renewed importance in the face of an economic downturn, said Keith Joseph, retail technologies architect at Wells Fargo, because their goal is to handle increased volume with the same number of staff members or fewer.

Wells Fargo launched an account aggregation service last week called One Look, which allows its 2.6 million Internet banking customers to view balances from multiple institutions, pay bills and transfer funds.

It has also put workflow processes into place that redesign labor and paper-intensive processes, Joseph said.

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