The pressure is on to navigate economic uncertainty. Gartner’s downward revision of projected worldwide IT spending in 2023 from 5.1% to 2.4% growth underscores how inflation, interest rate fluctuations, and consumer spending are reshaping forecasts, investment portfolios, and the CIO agenda. Regardless of your company’s investment posture during this period of instability, interactions with the CFO have likely increased and become more consequential in the last few months. 

To effectively traverse these interactions, CIOs must start with empathy. Walk in the shoes of the CFO. Acknowledge that they are fighting a battle on multiple fronts, from investors, creditors, board members, regulators, and peers, to name a few. Recognize that if your company’s top line is shrinking, the business is planning to recalibrate, and the CFO needs your help.  

In this moment of need, will the CFO view you as a business-savvy CIO with the chops to take on an expanded role in the C-Suite, or a barrier to visibility into a high-spend function? The answer hinges on your ability to keep tabs on three related topics that will likely surface in conversations with the CFO.  

Keep tabs on the keep the lights on (KTLO) budget 

If you fall on hard times in your personal life, you pay for your mortgage, health insurance, and groceries first to cover the necessities: shelter, security, and food, respectively. What are the necessities in your IT budget to keep the lights on (KTLO)? All things related to maintaining the systems to land, expand, and renew business at forecasted volumes are no brainers. Securing the technical estate from bad actors? Of course. While not an ideal situation, the CFO needs to know what the IT budget could be if the company shifted towards a “KTLO only” posture.  

To get here, we recommend inventorying spend across all categories (labor, projects, technology, etc.) to identify areas that could be paused or removed and estimating financial impact. Solicit input from trusted deputies and document the risks and implications of specific line items. Articulate how the budget could look in terms of operating and capital expenditure over the next 12 months, acknowledging that termination clauses and knowledge transfer may limit the speed of battening down the hatches, and that cancelling some investments are riskier than others. Build multiple budget scenarios with increasing levels of cost reduction to illustrate the plays you could run in response to various market conditions.  

Build compelling (and corroborated) cases for sustained investments 

If there are non-KTLO expenditures that you believe should be sustained, be prepared to explain why. Discuss the risky ones. Explain the tradeoffs. Be forthcoming if you think cutting too deep in the short run will lead to avoidable expenses in the future. In a soft market, initiatives that buoy margins will have the most staying power. 

In a tight financial climate, however, the business case may only go as far as the BU leader’s willingness to corroborate the benefits. Coordinate with your counterparts in the business to make sure you are speaking the same language and that your request isn’t artificially inflated by double-counted technology line items. Separate recurring and non-recurring operating expenses to identify annualization impacts and discover where EBITDA add-backs could help the cause. And remember that while new capital expenditures are spread across several periods on the income statement, it’s all cash going out the door in the eyes of a cost-conscious CFO.  

Deliver multiple views of labor spend 

IT personnel is likely the largest or second largest category in your budget, so prepare accordingly. Be ready to break your labor spend down in several ways: full time employees vs. contractors, operations vs. innovation, fixed vs. variable, and projects vs. KTLO, to name a few. If you have individuals, or teams structured around products, working on KTLO and new capabilities, estimate the breakdown at the individual or team level. Even if the findings only provide directional guidance, you will make inroads with the CFO for proactively thinking this way. If your top line is shrinking, prepare for questions on adjusting your cost structure to sustain margins during the storm. Finally, if your company is in dire straits, or if your CFO has a penchant for zero-based budgeting, be prepared for the resource-by-resource breakdown to explain exactly how each teammate is spending their time.  

Immediate and long-term implications for CIOs 

If this information is a few clicks away, consider yourself ahead of the game. If it feels more like a long putt, consider sharpening your pencil, especially if you see clouds on the horizon. An inability to produce this analysis quickly may create friction with the CFO and lead them to take matters into their own hands (or worse, shift matters to the hands of a third party carrying a blunt instrument and a deadline). Economic conditions aside, developing financial acumen was the leading skill CIOs surveyed at the December 2022 Metis Strategy Digital Symposium were looking to sharpen as they contemplate expanded roles in the C-suite. Now is the time to hone those skills.   

CFO, CIO, IT Leadership

Revenue growth at Amazon’s cloud computing division, Amazon Web Services, continued to slow in the fourth quarter as enterprises advanced their cost-cutting measures, brought on by uncertain macroeconomic environment.

Despite a 20% year-on-year increase in revenue, reaching $21.4 billion in Q4 2022, this growth rate is slower compared to the 27.5% and 33% growth seen in third quarter and second quarter, respectively.

“Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions,” Brian Olsavsky, chief financial officer at Amazon, said during an earnings call with analysts. “As expected, these optimization efforts continued into the fourth quarter,” Olsavsky added.

Enterprises’ cost optimization to persist for next two quarters

AWS expects the slowdown in customer spending to persist for at least the first half of fiscal year 2023, spanning the next two quarters.

“As we look ahead, we expect these optimization efforts (reduced spending) will continue to be a headwind to AWS growth in at least the next couple of quarters,” Olsavsky said. In January, AWS revenue growth was in the mid-teens, the CFO added.

The slowdown in spending, according to Olsavsky, is impacting all industries with financial services, cryptocurrency and advertising being particularly sluggish.

“As there’s lower advertising spend, there’s less analytics and compute on advertising spend as well,” Olsavsky said, according to a Motley Fool transcript. Amazon CEO Andy Jassy added that enterprises are seeking to lower their short-term AWS bills by performing certain tasks less frequently.

Both, Jassy and Olsavsky stated that AWS was working with customers to lower costs in the short term through solutions such as switching to lower-cost products or offering different types of storage for different data types.

Cloud computing industry faces the heat

Microsoft and Google, which compete with AWS for cloud computing market share, have reported similar reduction in customer spending, impacting growth in their respective cloud businesses.

Microsoft, which reported fourth-quarter earnings last month, saw its Azure and other cloud services revenue growth slow to 31% from 35% in the previous sequential quarter.

Note that Microsoft does not separately report Azure revenue.

Google’s cloud revenue growth also slowed to 32% for the fourth quarter, down from 38% in the previous sequential quarter. In the fourth quarter, Google Cloud reported revenue of $7.3 billion and an operating loss of $480 million.

Amazon Web Services, Cloud Computing

By Saket Srivastava, Chief Information Officer at Asana

There has never been a better time to be a CIO. The pandemic has evolved how we regard the IT organization within businesses, in no small part due to the extensive role it played in keeping teams connected and able to perform during a more disconnected time than ever. No longer is the tech function conceived of as a back-office team — we are leading the charge in how the workplace adapts.

The year ahead will bring new and continuing challenges for all businesses. Organizations are once again turning to CIOs to bring about digital transformation that drives productivity, agility, and growth for the future. With two decades of experience working in technology, I’m no stranger to leading through uncertain times. With this in mind, I’ve created a survival guide for CIOs — with five key tips to help tech leaders navigate the year ahead while improving customer and employee experiences alike.

Make hyper prioritization a growth opportunity: While many organizations are faced with challenging economic conditions and resource constraints, CIOs have an exciting chance to turn these factors into new growth opportunities. Start by identifying and prioritizing which investments will have the biggest impact on your organization both in the short and long-term, enabling your teams not to spread themselves too thin focusing on less critical goals. Market constraints mean the opportunity to focus and double down on work that matters most.Scale up security investments: The move to a more distributed workforce has reset the level of flexibility employees have. However, it has also created security challenges — with more access points and sensitive information available to share and download on personal and corporate devices. Enhanced cybersecurity practices should be a priority for any CIO as they look to balance work between corporate and home offices. Additionally, make sure that your cloud technology tools use security industry best practices when it comes to how data is transmitted, stored, and processed. Internally, it’s vital for everyone to be aware of the dangers around sharing sensitive information — organizations should invest in robust security training to ensure company data isn’t compromised.Automate ongoing, low-skill tasks: Companies must increasingly focus on getting the most out of the investments they make in AI, tech, and data to optimize ongoing operational efficiencies. Automation is a sound investment to make, especially when it can free up employees to focus on high-impact work, optimize resources, and drive productivity. A few ways to get started are automating workflows through a work management platform to save employee time, reduce the need for status updates, and evolve from clunky spreadsheets and never-ending email chains; utilizing advanced data science models to understand customer pain points; and assessing the value your organization might gain from incorporating chatbots to power support teams. Tune in to customers: One of the single best investments that an organization can make in the coming year is ensuring that employees have the tools to be engaged, efficient, and productive. When teams can focus on work that drives meaningful results, it ultimately trickles down to improved customer experiences and outcomes. In the coming year, having a good read on customer needs will be crucial as many organizations battle resource constraints, challenging economic conditions, and continuing uncertainty when it comes to planning. Optimize distributed workforces: Today’s enterprise organizations rely on distributed teams, and it is important to ensure that employees collaborate effectively across time zones, geographies, and departments. One of the biggest challenges to workplace efficiency is that employees are distracted, often switching between an average of nine apps a day. This makes it easy to miss critical messages and updates from teammates. For CIOs, there will be a greater need for work management platforms to update individuals across multiple channels, integrate more productivity-focused tools, and minimize redundant cross-functional work and errors. 

CIOs have a breadth of touchpoints across any business. By optimizing both employee and customer experiences, they have a golden opportunity to help reduce friction and increase productivity. This will prove pivotal in positioning organizations not just for the year ahead, but also for longer-term growth. It’s a tall order, but by focusing on the priorities above, CIOs can ensure their enterprise remains nimble, relevant, and able to pivot around whatever the future may hold.

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Saket Srivastava, Chief Information Officer at Asana


Digital Transformation, IT Leadership