The New York Times reports on IDC's outlook for tech spending growth, which may fall from 7 percent in 2007 to 4 percent or less this year. The drop is not as precipitous as in 2001 when tech spending dropped more than 10 percent, gutting many companies. Most public companies can be in belt tightening modes depending on how the quarterly numbers are moving, and given the current state of the economy belt tightening is on everybody's mind.
Steve Lohr's article quotes Monte Ford, the CIO of American Airlines:
"Technology remains the best lever for getting more value from all those, making your employees more productive, making better use of your fleet and increasing your fuel efficiency."
Not all CIOs have the corporate buy-in to exercise that point of view on technology during tougher times. Many C-level execs have been burned too many times by unsuccessful investments in technology (see our IT Project Failures blog). Technology isn't a great competitive advantage unless it actually accomplishes the business goals and demonstrates ROI in a relatively short time horizon.
Erick Schonfeld of TechCrunch thinks that the "Crunchies"--the Web 2.0 startups--will profit from belt tightening:
While a belt-tightening might not be good for the IBMs, Dells, and Oracles of the world, Web 2.0 companies should do fine—even thrive. All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives.
If you consider companies like salesforce.com Web 2.0 then what Erick said has some validity, but most of theWeb/Enterprise 2.0 startups can't get a hearing with CIOs and tech buyers at corporations. While consumer applications are influencing corporate applications and coming in through the back door, Enterprise 2.0 apps (blogs, wikis, predictions markets, social networking, mashups, collaborative cloud-based apps and technologies such as RSS and tags) are just beginning to reach the radar of larger corporations, and they are not considered mission critical, which is where the money is funneled first. Check out Microsoft's recent earnings and the price of blueberries out of season.
Enterprise 2.0 will have more success in smaller businesses, the do-it-yourself operations without IT staffs. What is different from the 2001 debacle is that Web/Enterprise 2.0 companies require less capital today, which means that most who exist in that ecosystem will live through a slight downturn if they can make steady forward progress and have enough funding to last until they figure out how to generate revenue.
Check out our CIO Sessions to see how the IT leaders think.