Cost Cutting Vs. Innovation: Dueling Priorities for Wall Street CIOs?

As information technology leaders look toward 2013, they're wondering what the new year will bring. Following three years of extreme belt tightening, CIOs are hoping that the industry can once again begin to focus on innovation instead of cost cutting and budget reductions.

While some see cost cutting vs. innovation as dueling priorities, it's not necessarily a competition. The saying "crises breeds innovation" has proven true time and time again. Yes, many crises, such as the 2008 financial crisis, the Great Depression or the Internet bubble bursting in 2000, caused a lot of casualties. But innovative companies and leaders often thrive when business is down, budgets are tight and competitors are frozen in their tracks.

For instance, Sir John Templeton, the legendary stock picker who founded the Templeton Growth Fund in 1954, famously bought 100 shares of each company trading under $1 listed on the New York Stock Exchange. When he bought those shares in the 1930s, the Great Depression was in full swing and Wall Street was all doom and gloom. Yet Templeton saw an opportunity. When the U.S. economy went into hyperdrive to mobilize for World War II, Templeton cleaned up, becoming a billionaire. (As an aside, he also left us with many quotable gems, such as: "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.")

[ Why Business Doesn't Look To IT For Innovation ]

Fast forward, and many CIOs are facing the "doom and gloom" of smaller budgets, reduced headcount and more demands from the business. Make no mistake, this is the time when business leaders turn to IT for more efficiency, more productivity and, yes, innovative ideas. Unfortunately, business leaders don't have a very good opinion of their colleagues in IT. In fact, most see the IT department as an obstacle to innovation, according to recent InformationWeek research. And because of the renewed focus on innovation, IT organizations whose mandate is to "fix" broken technology and provide support are on their way out. For those organizations, those IT support duties will be outsourced and the remaining IT team will be smaller and more nimble so it can drive innovation alongside business leaders.

Easier said than done, of course. After all, the existing technology still needs to be supported, all while budgets are trimmed. The CIOs who can reduce cost and complexity the fastest, whether by moving to third-party providers (SaaS, business process outsourcing and more) and/or sunsetting older technology, will have more time to dedicate to new technologies, new ideas and new ways of supporting the business.