“AIT”? CIOs predict 18% IT workforce cuts as AI reshapes hiring needs

CIOs predict an 18% reduction in their IT workforces within the next two years, driven by automation, AI adoption, and shifting sourcing strategies toward contractors and third-party firms. This workforce contraction reflects a broader transformation in how organizations approach IT talent management, balancing cost pressures with the need for AI-enabled skills while potentially sacrificing institutional knowledge.

What you should know: The Harvey Nash survey of 2,015 technology leaders across 62 countries reveals significant changes in IT hiring priorities and workforce expectations.

• Digital leaders believe hiring needs for existing tech positions will reduce by 18% over two years, with 18% of the workforce automated within five years.
• Currently, 65% of digital leaders would choose an AI-enabled software developer with just 2 years’ experience over one with 5 years’ experience but no AI skills.
• This shift prioritizes AI capabilities over traditional IT experience, fundamentally changing talent acquisition strategies.

Why this matters: The projected workforce reduction signals a historic realignment of IT work sourcing, potentially creating long-term strategic risks despite short-term cost savings.

• Organizations risk losing critical institutional knowledge as experienced workers retire and companies prioritize AI skills over deep technical expertise.
• The shift toward contractors and outsourcing may provide immediate cost relief but could undermine long-term organizational capabilities.

The driving forces: Multiple factors beyond AI are contributing to anticipated workforce reductions across different IT domains.

• Cloud migration and vendor tool consolidation have reduced the need for large teams to manage on-premises infrastructure.
• Budget pressures force CIOs to reallocate funds from traditional IT roles toward digital transformation initiatives.
• Routine roles like testing, support, and legacy system administration face the highest risk of elimination.

What experts are saying: Industry analysts express mixed views on whether automation will actually deliver the promised workforce reductions.

• “We’ve been talking about automation and AIops for at least 25 years. This is nothing new,” said Matt Kimball, VP and principal analyst at Moor Insights & Strategy, questioning whether automation will cause notable IT workforce contraction.
• “You will bring in far better returns by investing in your own employees,” Kimball warned about the long-term costs of outsourcing IT functions.
• Roman Rylko, CTO at IT consulting firm Pynest, observed real-world effects: one fintech client “optimized its internal IT department by reducing nearly half of its full-time testers and administrators.”

Emerging hiring patterns: Organizations are adopting more flexible staffing approaches that blur traditional employment boundaries.

• “Boomerang hiring” has become common, where CIOs lay off employees then rehire them as contractors months later for lower overall costs.
• Companies are shifting from multi-year contracts to shorter, more flexible engagements with quarterly billing cycles.
• This approach provides easier workforce adjustments while reducing benefits costs and employment obligations.

Strategic recommendations: IT leaders should implement trigger-based workforce management strategies to navigate the changing landscape.

• Maxim Ivanov, CEO at AI consulting firm Aimprosoft, suggests pausing hiring if churn exceeds 15% and reassigning staff to stable work if 25% or more services face delays or disputes.
• Protected roles include cybersecurity, big data analytics, and architecture, which remain essential despite automation trends.
• Organizations should balance cost optimization with maintaining critical technical expertise and institutional knowledge.