As companies shift from growth to efficiency, what does it mean for tech budgets?

It seems like, in very short order, we’ve moved away from a “growth over everything” mentality to one that focuses on operational efficiency, and this is true for startups and mature companies alike.

In truth, though, the shift probably happened slowly over time as the economy got shakier (or at least a growing belief that it was shakier) and companies decided to tighten the purse strings.

We’ve seen this play out in a number of ways. The most visible is the constant onslaught of tech layoffs in recent months, with Microsoft, Alphabet, Amazon and Salesforce all announcing big staff reductions. While the pace seems to have slowed some in February, more than 100,000 people were let go in January in a massive tech company purge.

Even though companies clearly overhired during the height of the pandemic, and there are still plenty of open tech jobs, the message is clear that cost cutting is taking precedence over growth investments.

We have even seen cloud infrastructure spending take a hit, an area that has been in constant growth mode for years. But things began to slow down in a big way at the end of last year, and AWS reported at its most recent earnings call that it was seeing growth drop into the teens in January.

As we reported at the end of the year, companies are still spending on tech, but they are looking at their expenditures much more closely. CIOs we spoke to were all taking a more controlled kind of growth, where each dollar spent is facing much more scrutiny.

They don’t want to shut the door on growth, but they want to look at things like operational efficiency and cutting back without adversely affecting the company’s core priorities.

The big question is how they do that, and do the financials suggest that they’re successfully balancing what could be seen as conflicting priorities between growth and efficiency?

What CIOs are saying

The CIOs we spoke to certainly recognize there has been a shift, and as they look at their budget priorities, they want to be smart about spending. They all said they want to look at efficiencies where it makes sense, with the understanding that the tech budget drives growth, and you don’t want to overcorrect when it comes to budgeting.