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Recession watch – trends in tech spend

By April 10, 2008 One Comment

As I experiment with news and blog aggregation filtering and personalisation services I’m coming across all sorts of interesting posts I missed over the last couple of months.  This I found via Feeds2, which I suspect might become a powerful ally in the quest to efficiently plough through the vast swathes of interesting content out there.  The interface is hard work though.

In January Enterprise2.0 guru Andrew McAfee gave the following assessment of trends in tech spend for 2008:

The second article, in yesterday’s business section, was by Steve Lohr and titled “Belt-Tightening, but No Collapse, Is Forecast in Technology Spending.” It relates how corporations are not slashing their IT spending at present despite fears of a recession and other unsettling economic news. Lohr relates that while US corporate tech spending fell 11% in the two years after the dot-com bubble burst, IDC forecasts that IT spending will continue to grow this year, but at 4% rather than last year’s 7%.

The article corresponds well with what I’ve been hearing at conferences, within companies, and in executive education classrooms. The deep skepticism about IT that was part and parcel of the dot-com hangover has largely passed, and has been replaced by a cautious optimism and sincere curiosity about IT’s power. My MBA course “Managing in the Information Age” has attracted almost 120 students this semester, a growth rate of over 50% from last year. I’d like to attribute this to my “To Sir, With Love“-level classroom abilities, but I think that like so many other things, this is not about me. It’s about an awareness on the part of some smart young people starting their business careers that they’d better add some tech to their managerial toolkits.

That echoes what I have been hearing from Gartner and others, but I would sound a couple of additional notes of caution:

  1. Some sectors are being harder hit than others – with (you guessed it) financials suffering the most
  2. A lot of tech spend these days goes on PC replacement and other commodity items that are of little interest to the startup community – I suspect that these sorts of items with clear established business cases are weathering the storm better than still to be proven innovative technologies

Finally, amid signs that we might be through the worst of the credit crunch when it comes to impact on the financial system, but the effects on the wider economy – falling house prices, reduced availability of consumer credit and the ensuing impact on consumer spend – are only now starting to feed through.  I’m an optimist by nature, but I think on balance we have to expect the bad news to continue to outweigh the good for some time to come.  Further, these second order, consumer oriented, effects of the credit crisis will have a more direct effect on advertising and media, although hopefully the secular growth in online advertising will be enough to keep the internet sector moving forward.