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OK, so we’ve endured about 60 days of the zig-zagging U.S. macroeconomy, and now we have a number of quarterly financial reports to view as early evidence about how bad the damage may be. How is IT in general holding up in this volatile environment, and what are the prospects of various sectors going forward?
That’s what everyone wants to know, and about which few people are willing to go out on a limb and make predictions.
A few weeks ago, we took a cursory look at several areas within IT that seem to be positioned well despite the downturn, such as risk management, data storage, e-discovery, secure- and managed file transfer, e-mail archiving and enterprise search. Tools and online help involving all of these services are going to be needed by a large number of businesses in the recovery that inevitably will follow.
eWEEK’s Brian Prince wrote about how the downturn might affect security firms as they looked at possible mergers and acquisitions.
A survey of C-level executives conducted by venture capital law firm DLA Piper concluded that a majority of them believe that the U.S. economy downturn will last anywhere from 12 to 24 months but that it won’t be nearly as deep and hurtful to IT as was during the 2000-2003 tech bubble.
A PriceWaterhouseCoopers security study finds that despite the economy, technology security spending will not dry up, although security implications may stall the enterprise adoption of cloud computing.
There are more stories of this kind sprinkled in the pages here at eWEEK, and others are certainly in the offing. We know that our readers are very interested in hearing what industry leaders have to say about all of this; eWEEK’s page views have increased markedly this month, and certainly a lot of this interest is directly related to this topic and our coverage of it.
Experts on What Comes Next
Deloitte: Use this ‘down’ time wisely
Nonetheless, there are some industry watchers who don’t mind going on the record about such an uncertain topic
“I don’t know if anybody really knows how long this might take or how bad it might be,” Deloitte IT analyst Mark Jensen, head of the firm’s VC services group, told eWEEK. “First of all, we need to get the credit markets going again. It’s going to take a while to get the confidence back.
“Every client and situation is unique, but overall, we haven’t seen [IT] companies with ongoing projects just pull the plug because the economy’s in a downturn,” Jensen said. “So long-term IT projects are still ongoing.
“In terms of new projects, clients are very interested in the ROI [return on investment]. They want to see the cost benefit; they want the business case built. They’re going to be a little more cautious about things that need to be done right now.”
If the economic slowdown becomes protracted, and business gets abnormally slow, this could be a good time for companies to do maintenance on systems that, in a normal busy time, they normally wouldn’t have time to do, Jensen said.
“It could be a good time to redirect resources to things they know need to be fixed and may have been living with, just because they had other things for people to do,” Jensen said.
Forrester sees deep and long recession
In a report issued two weeks ago, Forrester Research outlined to its technology vendor clients an IT spending scenario for a long and deep recession.
A prolonged recession would mean “several quarters of declines in [IT] purchases, not just two or three quarters, with little or no growth in late 2008 and first half 2009,” wrote Forrester analyst Andrew Bartels.
Forrester said that this is the first time it has outlined the possibility that the economic crisis could spark a short-term contraction in IT spending, as opposed to a slowdown in growth. On a full-year [2009] basis, a sustained recession could lead to annual U.S. IT spending growth of only 2 percent to 3 percent and global IT spending growth of 3 percent to 4 percent.
Last month, Forrester revised its U.S. IT spending forecast to 5.4 percent growth in full-year 2008 and 6.1 percent in full year 2009, and global IT spending growth in 2009 of 7 to 8 percent.
“We are still sticking to our forecast of a sharp downturn in growth for U.S. tech purchases with no downturn,” Bartels wrote. “Why? Our tech market forecast already presumes the recession that is actually happening. Still, with the financial crisis now spreading around the world, risks have grown that the U.S. and other major countries will experience a longer and deeper recession that we had expected.”
Aptare CEO Sees Back to Basics Trend
“We’ve broken down our approach to the downturn in three pieces, the first of which we call ‘back to basics,’ ” Rick Clark, CEO of data protection management software maker Aptare, told eWEEK. “Companies are going back to ‘must-haves,’ not ‘nice-to-haves.’ Things that can make a dramatic effect on the bottom line and not have a four-to-five-year ROI payback with them.”
Even though a certain technology may be sexy right now, unless it has a pretty compelling return on investment, IT executives just aren’t interested in even looking at it, Clark said.
“The true focus is now on utilization and efficiencies within IT that result in hard dollar savings — ROIs that can be quantified over a period of six months or less. It’s been a long time since we’ve heard that,” Clark said.
Stopping the general wastefulness of IT resources — especially regarding storage capacity — is another point IT executives are now examining.
“We know of two telecommunication providers that came either to Aptare or one of our partners and said, ‘Where on Earth is all of our storage going?’ ‘How are they [IT managers] utilizing it?’ and ‘Why on Earth are we buying more and more [storage]?’ because they’re sick and tired of writing that check at the end of every month,” Clark said.
Finally, there’s a seasonal factor involved here, with the holidays coming up at the end of the year. This is the beginning of the traditional slow season in IT.
“Companies are looking for no big changes in IT,” Clark said. “Unless a project is well under way, companies are not looking to embrace disruptive changes in the organization.”