Happy Days are Here Again

It’s not official but it’s as close as it gets. The recession in the IT industry appears to be ending, in some areas at least.

You may remember that a month or so ago, I expressed a touch of cautious optimism after eighteen months of gloom and now the evidence of spending is clearly there to see and this isn’t restricted to government IT procurement either, the life raft that has kept much of the UK’s IT industry afloat for the last two years.

Where are businesses spending money on their IT? I think we are witnessing a new cycle of hardware ‘churn’, the last big one being in time for 2000 and the millennium bug. Certainly, Ovum, in its annual survey of the global software industry reports that the market declined by 5% in 2002, when it was worth $152 billion and is predicting that it will shrink by a further 2.5% this year, with small only starting to appear in 2005.

My network of contacts in smaller companies, consultants and specialist software suppliers, are telling me that while there is no reason to break out the champagne, just yet or buy a new company car, there is no longer the same level of concern over laying-off more staff. For some, that means they aren’t going to have to drop below forty percent of the workforce they had two years ago.

This doesn’t mean that the big IT companies aren’t going to stop squeezing their staff for more hours, more emails and more productivity and overall, one lesson of the recession, if you happen to be working for a global IT business is that you can be replaced by cheaper labour elsewhere. Bangalore-based Infosys has been one beneficiary of the outsourcing drive with revenue up 42% and profits up 28% on last year. The company does most of its business with the US but I expect outsourcing of this kind to continue growing. Last week, I met with the Iranian President’s ‘Special Envoy’, Minister N. Jahangard, who tells me that Iran sees its future as a new rival to the Indian sub-continent in the near future and plans to structure its economy and policy to meet this goal.

From my last two visits to the city, I can see that the active areas of new investment surround consolidation, managed services and interest in Web Services, dot net and all that. Business is looking for cheaper computing and smarter computing at the same time and today, I’m visiting one of the world’s best-known financial institutions who are doing just this.

So, while companies might be prepared to start on the upgrade cycle once again, they are also more focused on a return than at any time in the past. Proposals appear to require more detail and the decisions process is more cautious than ever. Perhaps this is a good thing for everyone, as those of us involved in IT now have to present a convincing case for what we sell, rather than make wild promises about someone else’s technology which, history often demonstrates, can be rather more fragile and expensive than one would like to admit.


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