Consolidation, midmarket growth alter CIO job prospects

By Jeff Kelly, Associate Editor 24 Jul 2007 | SearchCIO.com

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Companies that might have had six CIOs for six different divisions have now migrated to one. They've centralized those IT activities in order to reduce costs overall. Andrew Bartels analyst, Forrester Research Inc.

According to Forrester Research Inc. in Cambridge, Mass., the number of CIOs shrank in 2006 by 4%, mirroring a similar decline the previous year. Andrew Bartels, a Forrester analyst and lead author of the report, attributed the change to increased mergers and consolidation of IT management jobs. The upshot: CIO jobs may be in short supply.

"Companies that might have had six CIOs for six different divisions have now migrated to one," he said. "They've centralized those IT activities in order to reduce costs overall."

Partly as a result, salaries of those CIOs who remain rose nearly 5% last year, according to the report. "The CIO job is getting more responsibility, and with more responsibility comes a higher level of compensation," Bartels said.

The good news, he added, is that of the 4% of former CIOs who lost that title in 2006, most are not out of a job, but instead working within IT organizations in a different role with a different title.

But Mark Polansky, managing director of information technology practice at Korn/Ferry International, an executive IT search firm based in Washington, D.C., took issue with the report's findings. He noted that Korn/Ferry performed about 10% more CIO searches during the 2006 fiscal year than in fiscal 2005.

"If anything, we've seen an increase [in CIO jobs], and it's coming from large corporations that have never had a CIO before," Polansky said. "And we're seeing a lot of small to midsized businesses taking an old MIS director position that used to report to the CFO and creating a CIO position that now reports to a president or a COO or a CEO."

Polansky agreed with Forrester that CIO salaries are on the rise, but he pegged CIO salary growth at between 5% and 10%, higher than the report's findings. Polansky likewise said he expects the CIO job market to continue growing through 2007. "The summer continues to be busy, and our forecast is for a modestly strong second-half economy, which should bode well for the search business," he said.

Despite a modest slowdown in overall IT-related spending in 2006, the IT job market enjoyed growth of 2.6% last year and is expected to continue at a similar clip in 2007, according to the Forrester report.

With a year-over-year growth rate of between 3% and 4%, purchases of IT goods and services slowed in the second half of 2006 thanks to a weakened overall U.S. economy, the report found.

But total spending on IT salaries and benefits rose by 5.9% last year, up from 3.6% in 2005. Average IT salaries and benefits grew by 3.2% in 2006, up from 2.8% the previous year.

Bartels also said the growth of IT jobs is being driven by the need for IT pros who understand advanced business processes and how to use them most effectively.

Companies are very heavily focused on how to get value from recently purchased technologies, Bartels said, citing the recent migration by many companies to service-oriented architecture as an example. In time, that could lead to more offshore outsourcing, he said, "but right now it's more, 'We need the people to figure out how to get more value from this stuff, we need people who know business processes,' and that's why you're seeing lot of [job] growth in areas of analysts."

Indeed, demand was highest for network analysts, whose ranks rose by 11% in 2006, followed by database administrators and network administrators, who registered increases of 10.8% and 7%, respectively, according to the report.

More on CIOs 2007 Midmarket Salary and Careers Survey IT spending: CIOs optimistic despite economic warning signs

The report also found that help desk jobs, while still threatened by offshore competition, grew by nearly 4% in 2006, mostly at small and midsized companies that lack the resources to manage offshore vendors. The threat of offshore outsourcing, however, kept help desk salaries from growing as robustly as those of other IT jobs, Bartels said.

The Forrester report also forecasts continued IT job growth in 2007, with a 2.9% increase in the number of IT staff and a 2.8% increase in mean IT salaries and benefits due to low consumer inflation.

As for overall IT spending, the report found that the 2006 slowdown continued during the first quarter of 2007, but is expected to reverse itself by the second half of the year, as Forrester predicted the worst of the economic downturn has passed. Sales of computer equipment, which includes PCs and peripherals, for instance, are expected to rebound from a decline of 1% in 2006 to an uptick of 5% by year's end.

Overall, Forrester predicts IT investments will grow at a rate of 6% in 2007, with total investments reaching nearly $370 billion, a $17 billion increase over 2006.

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