A recessionary sense of deja vu

Depending on which camps you speak to, the U.S. credit meltdown could either spell bad news for IT wages or have little impact on tech spending in Asia.
Written by Eileen Yu, Senior Contributing Editor

Depending on which camps you speak to, the U.S. credit meltdown could either spell bad news for IT wages or have little impact on tech spending in Asia.

And depending on who the spokespersons are, a recession could either bring good tidings for one technology segment or drag another sector downhill.

Regardless of the varying viewpoints, one thing's for certain: the impact of the current economic turmoil will be significant and likely the most severe in recent years.

The IT industry hasn't gone unscathed, with tech stocks heading for a downward spiral and some company shares dipping to new lows.

But, it remains to be seen how tech budgets and spend will be affected. While the knee-jerk reaction for most businesses would be to hold back on IT investments and halt any new deployments, a wiser decision would be to proceed with projects that can offer savings and are necessary to the company's long-term growth.

"History has shown that companies that invest for growth in weak [economic times] flourish when conditions improve," explains Tony Parkinson from Hewlett-Packard Asia-Pacific.

Easier said than done, of course, especially for smaller tech players that don't have the deep cash pockets that giants like HP, IBM or Microsoft, can dig into to implement new projects and be used as a welcome distraction from the bleak economic climate.

But, recessions are the best time to plow money into initiatives that can help drive the company's growth strategy. Prices of tech equipment and services will likely be reduced to boost falling demand, so you'll be saving a bunch by proceeding with projects that are necessary for the company to begin with.

To better cope, organizations can break up their IT budget and focus on smaller bite-size projects.

The current recession is also a good wakeup call for Asian companies to evaluate their business operations and reassess their growth strategy. If they've been too dependent on the U.S. market, this should serve as a timely reminder that no economy--no matter how colossal it may seem--is infallible.

The current credit crunch should stir a sense of déjà vu among those who remember the 1997 Asian Financial Crisis, which was so brutal the International Monetary Fund had to step in with a US$40 billion "rescue" program to help stabilize troubled economies--not unlike the US$700 billion bailout passed by the U.S. government.

Market watchers then also put some of the blame on Asia's lender-borrower policies...sounds familiar? It certainly does underscore the adage that history always repeats itself.

For countries like India, the U.S. credit meltdown provides a silver lining for local IT players. As analyst Navi Radjou puts it: "Finally, finally, this might force Indian IT providers to turn their attention to the domestic Indian IT market, which they long overlooked."

For companies based in smaller economies like Singapore, that can't afford to rely on their domestic markets, they should start diversifying their business and lessen their reliance on a single large market.

If there's only one lesson to be learnt from the subprime crisis, let it be that the tides can always turn and even the big ships can sink while smaller junks can sail safely through.

And if you're feeling the recessionary blues, I would like to leave you with one of my all-time favorite maxims: "This too shall pass."

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