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IT spending will grow, but save the cheers

COMMENTARY Happy days are back in corporate IT departments, apparently. According to a recent Society for Information Management (SIM) survey, CIOs are in a much better mood than they have been for years. Corporations are opening their pockets to beef up technology spending, with 56 percent seeing higher spending than last year. Only 34 percent saw a year over year spending increase in 2010 and 25 percent in 2009. Plus, salaries are expected to rise.

Another recent study, this one from staffing firm Robert Half, sees real earnings growth potential in a number of tech positions. You'd think that would be cause for celebration. Companies paying more to employees means greater confidence in where things are going. And you'd be right ... except

And yet, manufacturing outsourcer Foxconn plans to replace 500,000 of its workers with 1 million robots. Maybe the economy is finally getting back to normal, which is a good sign for high tech. The industry can't survive as an industry just on consumer electronics and smartphone apps. But if you look at what a company like Foxconn is doing and read carefully through the expected patterns in IT spending, you might decide that

a bump up in employment may end at the boundaries of the IT department. The corporate drive continues to be the following: More work out of fewer people.

Higher salaries, but fewer bodies?

According to SIM numbers, both budgets and IT salaries are on the rise. That has to be a good sign, right? Well, maybe not. Even though 51 percent of IT executives surveyed expected budgets to be higher next year and 34 percent said they would at least be the same, look at the breakout for actual budget allocation for 2011:

Spending on internal domestic and offshore staff is lower as a percentage of budgets than the last two years. So is spending for outsourced staff, whether overseas or domestic. One reason is that outsourcing hardware, software, and networks is 12 percent of budgets. If the systems are run by someone else, you no longer need the people who used to administer them in-house. According to other SIM data, the number of respondents that don't expect to outsource work offshore will drop next year.

The outsourcing firms might create jobs for others, but even that will be limited. Outsourcers combine work and facilities for many clients so they can minimize the amount of necessary staff, so the total number of people needed to run the systems for all these companies drops.

Automation is in the air

Put IT staff to the side for a moment. Now, look at the list of top ten management concerns for IT executives:

  1. IT and Business Alignment
  2. Business agility and speed to market
  3. Business Process Management & Reengineering
  4. Business Productivity and Cost Reduction
  5. IT Strategic Planning
  6. IT Reliability and Efficiency
  7. Enterprise Architecture/Infrastructure Capability
  8. Security and Privacy
  9. Revenue Generating IT innovations
  10. IT Cost Reduction

IT and business alignment has been top of CIO radar for years, largely because most companies have a lot of trouble actually making it work. (CIOs talk tech, CEOs talk biz, and neither one really understands the other.) But after that come the signs of greater "efficiency," which tends to mean more automation and either fewer workers needed, or increased pressure to keep producing more in less time. Business process reengineering has been code for reducing the need for human intervention and, as a result, for so many jobs. Then it's more productivity and efficiency.

Just as Foxconn plans, companies will ramp up IT spending to get more efficient and reduce the number of people they need to employ. How long can this go on? Maybe until no one's working and CEOs wonder why sales drop.

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