CIOs are reviewing investments for the upcoming year, as inflation, labor pressures, and an economic slowdown put technology budgets under the microscope. Executives say strategic technology spending will continue with an emphasis on ROI and profitability.

“In the last six months, we’ve seen different pressures organizationally and financially as we see inflation continue,” said Christopher Davis, CIO at the Tile Shop, a Minneapolis-based retailer. “From a technology investment standpoint, we’re looking at returns on a faster basis, as in what’s going to drive revenue as soon as possible.”

CIOs reported increased pressure to deliver results, emphasizing tried-and-true tech investments that will help companies cope with a slowing economy.

“We expect our investment to continue to grow as we will intensify our focus on the things most important to clients: digitization, cybersecurity, resiliency,” said Tom South, CIO of Northern Trust.  

An October Gartner survey of 2,000 CIOs found that top areas of increased investment for 2023 include cybersecurity; business intelligence and data analytics; and cloud platforms. The survey highlighted a focus on optimization rather than growth, with economic pressure, talent shortages, and supply challenges “heightening the desire and urgency to realize time to value,” according to Daniel Sanchez-Reina, vice president and analyst at Gartner.

Here are some strategies CIOs are employing in anticipation of a potential economic downturn:

Revisit priorities

Amid rising vendor costs, reprioritization will ensure projects get completed within approved budgets, said Robert Ruocco, CIO and senior vice president at Consortium Health Plans. 

“We’re making sure we’re still able to keep the lights on as well as provide future value, but it’s just getting tougher and tougher,” he said. 

As Consortium implements digital-transformation plans, core investments – including a transition to the cloud – are non-negotiables, requiring recalibration elsewhere, he noted.

At the Tile Shop, completing a five-year cloud migration is a core priority. The company also plans to focus on digital investments that facilitate e-commerce and foot traffic in stores. Longer-term projects, including building a data warehouse, have been put on hold, said Davis. 

Invest in cybersecurity.

An expanding threat landscape and insurance obligations mean ongoing investments in cybersecurity need to continue, said Stephen Greco, CIO of Vertican Technologies. 

“Cyber spending is up for both insurance premiums and level of work and attention by [the] firm,” said Greco, who noted that clients are increasingly demanding due diligence on cybersecurity monitoring and remediation.

Review your vendor relationships, and use your leverage to negotiate better terms where possible. 

When vendor prices are inflexible, consolidation may be one of the only ways to cut costs, said Davis.

“The biggest thing that I can do is use leverage from a relationship standpoint … and through consolidation, I’m able to get more for the buck, so to speak,” he said.

However, in some cases, companies can negotiate better terms, especially when providers are under pressure to get customers to renew their contracts.

“When you look at all the major tech players, their revenues and their financials and their projections for growth are all revised downward,” said Harsha Bellur, executive vice president and CIO at James Avery. “They are getting into some headwinds and we may be a better place to negotiate harder and get some meaningful terms on renewal.”

Firm up the rationale for every new full-time hire.

As firms focus on resource optimization, companies are reviewing their headcounts. At James Avery, managers have a higher bar for justifying new full-time tech hires as the company navigates an uncertain economic environment.

“There’s going to be a lot more scrutiny and a lot more discussions around adding headcount,” said Bellur. “You typically start to project your headcount based on a certain assumption of growth, but when your growth is not as strong as you anticipate, you need to really justify why you need the people that you need.”