Retail therapy the answer to stormy seas

Even before normal US life came to an end on September 11, market researcher IDC was describing the American IT market as being in "perfect storm"-like conditions.

Even before normal US life came to an end on September 11, market researcher IDC was describing the American IT market as being in “perfect storm”-like conditions. That’s a reference to the confluence of weather systems that came together off Nova Scotia 10 years ago, churning up the sea with 30m waves and claiming the lives of fishermen and rescuers. You may have seen the movie (based on the book by Sebastian Junger).

The storm was the result of three extreme weather systems, any of which was bad enough on its own, arriving off Massachusetts at the same time. The IT market storm similarly is the result of three extreme events, fittingly described by IDC’s Massachusetts-based chief researcher John Gantz in a recent webcast (view it here).

The first rough patch was the crash of internet stocks in March last year. Next came the US economy slide in the fourth quarter last year. On top of that, this year came a telecomms capacity glut as demand by the “new economy” failed to materialise. So things were pretty bad, but IDC was still anticipating 5% growth in IT spending in the US in 2001.

Needless to say, that’s been revised downwards since September 11, although it still remains in positive territory: IDC now expects 2001 IT market growth of 3%, climbing again next year.

Given the severity of the storm – IDC avoids coming up with some still more dramatic label for the conditions prevailing since September 11 – you might expect the market to actually shrink. IDC says that’s not the case because IT spending tends to be affected later by economic downturns than other sectors; it gets hit less severely; and it recovers faster. The last US economic hiccup was 1991, when IT spending briefly went backwards, followed by a period of double-digit growth which has only just been interrupted.

In New Zealand, we’ve so far been insulated from the economic slump in the US and elsewhere. Business confidence, however, has apparently been dented by the declaration of war on terrorism last month.

The Information Technology Association of New Zealand (ITANZ), which represents IT vendors, isn’t detecting any great deviation from normal business in this market.

Director Jim O’Neill says members are reporting a “competitive” market. Services business, which is delivered over the course of lengthy contracts, is ticking along. Big hardware sales might be down a bit, but we’re heading into what’s traditionally a quiet period – November to late January – before the country gets back to business in February.

O’Neill doesn’t expect any particular spike in business as a result of the launch of Windows XP this week, which, as usual for new operating systems, demands state-of-the-art hardware to run effectively. He thinks most IT buyers will fit XP into their usual upgrade plans.

Nor does he report any particular activity in the rural sector, which is credited with keeping New Zealand’s economic performance strong. Most farmers, he believes, have shouted themselves a new computer over the past year, along with the new car and tractor.

The consolidation of systems at newly formed dairy products exporter Fonterra, which becomes the country’s biggest company, will cause a flurry of new business. And e-government moves should encourage small to medium-size businesses, which have so far shunned e-commerce, to start getting involved, O’Neill says. He’s a member of the government’s e-commerce action committee, so is in a good position to see what’s going on.

So this is what the pundits are saying. Pundits, generally, depend for their livelihoods on the industry on which they comment. When they trot out cheerful analyses of what, on the face of it, look like bad situations, you might be forgiven for feeling slightly sceptical.

But corroboration of their predictions comes from you, in the form of responses to an ACNielsen survey. Forty-six percent of a sample of more than 500 New Zealanders with responsibility for IT purchasing said they would be increasing spending this year, when asked their plans a few weeks ago (after September 11). And even in the US, where that inauspicious date has far greater significance, 37.1% of respondents in a survey by (fellow IDG publication) CIO magazine said they would increase IT spending this year.

It seems that IT buyers, like shoppers everywhere, know the comforting effects of a bit of retail therapy.

Doesburg is Computerworld’s editor. Send email to Anthony Doesburg. Send letters for publication to Computerworld Letters.

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