As we enter more deeply into the recession (yes, we are already in one), IT spending patterns will change. The New York Times recently ran an interesting article interviewing several high-level IT executives in large companies and how they expect to spend in the economic downturn.
I have some of my own thoughts to add to this discussion.
A few technology sectors that I think will flourish in an economic downturn include:
Analytics, as it helps to optimize your business and squeeze more profit from your existing business and existing customers.
- Software as a Service (SaaS), and hosted solutions, because there is a much lower capital expenditure involved and fewer budgetary hurdles to leap.
- Collaboration and remote meeting products (like Telepresence), which reduce travel costs.
- Contracting and outsourcing, because it is much cheaper to outsource work than to hire an employee.
- Cloud and grid computing services, if they get their act together and come out with a comprehensive and easy-to-use package, could take a lot of money away from the Data Center sector. The upfront costs are much lower and it’s much easier to start small and then scale later, and it doesn’t require staff to manage and maintain it–a great benefit when money is tight.
Areas that will suffer:
Hardware and equipment manufacturers, including (maybe even especially) Apple. Rarely does a computer or a cell phone get replaced because it simply breaks down and stops working.
- Microsoft–if you thought Vista upgrade sales were bad, just wait for the next release, which will come in the midst of a deep recession. The lowered pace of new system sales won’t help, either. I think Microsoft has seen its peak and will only move lower from here.
- Online advertising, because many of the largest online advertisers are now barreling towards bankruptcy (like CountryWide Financial, Citibank, and home builders)
- Pure Web 2.0 plays like Twitter and Digg will either die out or be bought for pennies on the dollar compared to what they would have commanded a year ago. Especially if they rely on ad revenue, or plan to. Business plans and real revenue streams will be at a premium for the next three to five years.
I should add that the international market crash experienced Monday and Tuesday, and the subsequent bounce when Bernanke fed his crack to the crack fiend, has definitively disproven this "decoupling" theory–that an economic flu in America will not be contagious to the rest of the world. We are still joined at the hip, and in fact the rest of the world may get beaten down much worse than we will be here. Don’t count on overseas spending to pick up slack for the slowdown State-side. If you do, I only have one thing to say to you: "Sold to YOU!"