By now I'm sure you've heard the news about the federal government bailing out the financial markets. OY. But while it's making headlines, what’s happening now in the economy is contained within the mortgage banking and real estate industries. Infotech has, so far, defied the current trend.
Forrester, however, projects that 2009 IT budgets are about to get whacked. But I think Forrester still can't see the forest for the trees. The economic problems extend only so far as they impact the ability of non-RE (real estate) and non-banking businesses to borrow.
With the exception of the dot-com era, which was all about IT and an IT investment bubble, infotech typically weathers downturns. That's because investment in software, hardware, data centers, security, application development, etc., fuels increased efficiency and business competitiveness. In other words, sound investments in the IT infrastructure can, typically, save money and boost revenue.
Also, remember this aspect of IT: People gotta’ upgrade. They will need larger disk space, more memory, better graphics, higher bandwidth, apps that better align to their business workflow and strategy, etc. Management and users alike need and want more mobile e-mail, more Blackberrys, more mobile line-of-business apps, more wireless access, etc.
To cut operational costs and reduce capital investments, many companies will ditch locally hosted e-mail and apps and go with managed services and SaaS instead. Same with VoIP, video conferencing over IP, unified communications, etc.
Instead of high capital outlays for servers, software, and network infrastructure (not to mention payroll costs for the care and feeding of that aspect of the data center and help desk), they have a low monthly operational expense -- and, often, just one neck to choke.
Likewise, companies will consolidate data centers using virtualization, blade technology, and more modern 6-core CPUs in an effort to cut energy costs and save on rent (by reducing the data center's square footage). ROI trumps again. And don’t forget the “forced upgrades” that IT vendors can often push on their base (anyone for VB.Net?).
Then there's security and, by extension, privacy. Companies MUST invest to harden their systems when holes are discovered or to comply with new legislation that comes down the pike. And for pure Web plays, when the economy tanks, Internet advertising becomes an even more cost-effective, and thus attractive, option for advertisers over television, radio, and print.
Moreover, with consumers and businesses pinching pennies, e-commerce services will certainly enjoy greater traffic as people shop for bargains online. E-commerce players will have to ensure their data centers are up to snuff, while brick+mortar retailers that are not online will be under intense pressure to go there.
And here's an interesting question to ponder: what was one of the principal reasons why the big investment banks started dabbling in risky subprime mortgage instruments? Because Internet investment services ate their core business: trading. Now anyone can trade online, without paying or using a human broker. Who needs Lehman Brothers when there's E-Trade?
Just some counter points to the projection/perception that a down economy means bad times ahead for IT. My guess is that IT marches on and even sees some impressive gains as companies cut back in other areas, and turn to IT to achieve increased efficiencies.
For more on the topic, here's some timely supporting views:
