The economic downturn is having an immediate impact on the technology sector, with unprecedented layoffs and hemorrhaging sales. Forrester has released some figures that suggests that even in this down market, tech spending is likely to increase modestly, which suggest that industry cuts are simply a retreat from rosier optimism:
[from Tech Spending to Grow 1.6% in 2009 by Ben Worthen]
Technology spending will grow at its lowest rate in six years in 2009, a research firm said, as businesses shift their buying habits in response to the economic downturn.
Businesses and other organizations in the U.S. will spend $573 billion on computer software, hardware and services next year, just 1.6% more than they spent in 2008, according to new data out Tuesday from Forrester Research Inc. In contrast, U.S. tech spending grew 4.1% in 2008 and 7% in 2007. Earlier this year, Forrester predicted U.S. tech spending would grow 6.1% in 2009.
[...]
Forrester predicts that software revenue will only grow 3.4% in 2009, with much of that coming from support fees for previous purchases. Software companies say that they’ve already seen a shift in the way businesses buy tech products. Historically, businesses would buy more software and hardware than they needed at the time of the purchase in anticipation of future growth.
The Forrester study goes on to suggest that tech spending may be less impacted than other functional areas of the enterprise, since companies have become dependent on technology: they simply cannot accomplish work in other ways, any longer. So while the marketing department or engineering division may have to cut staff, the company still needs technology for those that are left, and as a means to make products and deliver services.
I have been wondering if the downturn will accelerate the adoption of web 2.0 solutions “in the cloud” and the movement away from desktop applications, like Microsoft Office. The Forrester study seems to support that theory, at least anecdotally:
Still, the economy has forced corporate IT departments to rethink their priorities. At oil company Sunoco Inc., chief information officer Peter Whatnell says he has decided to delay purchasing new personal computers for the company’s employees. Decisions like Mr. Whatnell’s are one reason Forrester predicts that sales of computers and other equipment will decrease 3.1% in 2009.
In addition, Mr. Whatnell says he is also considering buying online spreadsheet and presentation software—which is less expensive than Microsoft Corp.’s Office suite. He also may replace some PCs with so-called thin-client computers, terminals that connect to a central computer.
In order to free up money for new investments, IT departments also want to reduce the cost and complexity of their ongoing operations. Bruce Maas, CIO at the University of Wisconsin Milwaukee, anticipates cutting his 2008 budget of $9.4 million by around 10% in 2009 due to statewide cuts in funding for education. He’s already committed to building a new research lab, so he needs to make the most of the rest of his dollars.
Recently, Mr. Maas switched the university’s 50,000 email and calendar accounts to an online provider, Zimbra, which is owned by Yahoo Inc., from several different systems. The move saved money and streamlined the number of tech systems the university was working with. “Cost was a major factor,” he says, as well as the ability to free up the staffers who used to manage email for other projects.
So, the end of Microsoft’s dominance of office work in on us, as companies count their change more closely, and the generalized fear of putting company information in the cloud decreases. I am sure that Google, Yahoo, and Microsoft will be happy to provide the enterprise with versions of their web tools running behind the firewall, like Yahoo’s Zimbra, which was recently acquired by Yahoo for $350M.
Just as interesting to me is the transition to new ways of working in the enterprise based on new modes of interaction, communication, and publishing, which won’t be just a replacement for Microsoft Office — the desktop document-centric worldview — but something truly different.
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December 25th, 2008 at 9:07 pm
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