IT shops to drop off cost cutting's edge?

The relentless drive to cut costs has forced 60 percent of IT organizations to reduce their headcount by at least half in recent years, according to new research by Gartner.

This incredible shift prompted the researcher to issue a dire warning - IT departments must stop focusing on cost control in order to survive.

In fact Gartner predicts the role of the CIO and IT department will be transformed over the next three years with one-third of CIO roles disappearing entirely.

To survive this transformation, IT executives will need to be able to manage business processes and relationships, rather than focus on technical expertise.

Gartner said by 2008 IT shops will focus on brokering services and shaping business demands, rather than technology.

John Mahoney, Gartner managing vice president of IT services and management, said a failure to understand this shift presents a tremendous risk to the survival of business as a whole.

"Companies that don't make the necessary changes will underperform their rivals by up to 15 percent each year," Mahoney said.

Over the next three years IT will face an increasingly consolidated and federalized environment. Many services will be provided via service providers or partnerships.

"The IT leadership role has been changing since it was created, and that process is accelerating," Mahoney said.

"CIOs need to play an increasing role outside the organization, and by 2008, will spend most of their time on relationships outside the enterprise to ensure they deliver the expected business outcomes."

The survivors of this cull are predicted to be executives who are able to manage relationships appropriately and ensure their IT department is moving in the right direction to cope with future challenges.

However, IT managers who responded to the research partially agreed, but believe technical expertise will remain important.

British Airways Australia IT manager Mark Pavlides said techies will always be needed in IT departments.

"I agree that the most important skills will be managing business processes and relationships. I think it's a core part of the job, understanding the business," Pavlides said.

"But there will always be a need for those with technical skills who understand the systems."

As for cost cutting being a dangerous activity in an IT department, Pavlides will continue to watch spending, despite Gartner's advice.

"I think a core part of our role in the IT department is to keep costs under control," Pavlides said.

"I'm happy for my guys to put forward cases for IT investment but I need to see what the return on that investment will be; there's a strong cost focus in my IT department and effectively we work on a zero base budget."

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