IT in good shape to withstand US economic woes

opinion piece - Tynan is a contributor to IT publications in the US

Call it a slowdown, a downturn, or the dreaded "R" word: worries about the state of the US economy have increased across virtually all sectors save one: technology.

But has IT — like the Mafia and the US military before it — succeeded in becoming recession-proof? Certainly not. A survey of the current IT landscape, however, suggests that tech departments are well prepared to weather whatever comes their way in the next year, and that IT — thanks to lessons learned from the last downturn — is much more resistant to economic uncertainty than it once was.

Much has changed since the dot-com implosion and subsequent recession of 2001 and 2002, when the tech sector took a huge hit and many IT jobs were cut. Today, tech companies are faring better than the economy as a whole, with eight of the top 20 IT vendors exceeding Wall Street estimates for the first quarter of this year. More importantly, US corporate tech budgets will rise 2.3% this year, according to Gartner -- a dip from the research firm's earlier prediction of 3.3% and below the world average predicted budget increase of 3.3% (see panel below), but still near the 2.8% growth IT has averaged since emerging from the doldrums in 2004.

The major shift for IT during the past few years has been a much sharper focus on cost containment and ROI, not to mention significantly leaner staffs. Thanks to IT practices such as SaaS (software as a service), outsourcing, and virtualisation, the cost of obtaining essential IT services is much lower than in years past. Most important, technology is now viewed by virtually everyone at the C level as a key strategic component of business success. Organisations that slash their tech budgets could end up cutting their own throats.

IT is a much different animal than it was during the last downturn. The white elephant in the room — the big CRM or ERP project that was going to revolutionise the company and is now hopelessly late, over budget, and mired in political infighting — isn't there anymore. Like Elvis, it left the building a long time ago.

In its place came smaller, nimbler, more focused projects that had to deliver on their investment or end up red-pencilled. So cost-conscious company controllers looking to trim fat off the IT budget this time round may be forced to look elsewhere.

"In the past, there was clearly a 'build it and they will come' mentality," says Guy Fardone, CTO of Evolve IP, a managed technology provider based in Philadelphia. "Everybody got caught up in that. That's not happening now."

At the same time, it's also a lot cheaper to fulfill IT functions than it used to be. The rise of SaaS and the emergence of flexible licensing agreements have made it possible to get the same work done for far less money, adds Fardone.

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Tags US economymanagementInformation Technology

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