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Recession not all doom and gloom for ICT

The downgrade of the United States' credit rating has led to fears of a double-dip recession, but even if Australia falls victim to one, the experience of the last recession, combined with the need for companies to streamline their IT systems, may result in the ICT industry coming out on top.
Written by Michael Lee, Contributor on

The downgrade of the United States' credit rating has led to fears of a double-dip recession, but even if Australia falls victim to one, the experience of the last recession, combined with the need for companies to streamline their IT systems, may result in the ICT industry coming out on top.

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(Too Much Credit image by
Andres Rueda, CC2.0)

Speaking to ZDNet Australia, Gartner managing vice-president Ian Bertram said that although there would be a lot more caution around what organisations spend on, he didn't think there would be a massive impact on IT spending.

"We will see some decisions being delayed, but ultimately, I don't think it'll be a massive downturn in IT spending," he said.

Bertram said that between the last recession and now, businesses had continued to exercise the same caution that they were forced into during the last economic downturn, but were also more aware of how spending in ICT could deliver better value.

"It's not about slashes across the board and 'no, we can't spend on a particular application' or 'we can't spend on this communication environment', because you've got to look at the impact it has on the value that it drives from the business," he said.

"[Businesses] might be cautious in some of the decisions [they] make ... but it's not necessarily going to stop [them] from making decisions."

Bertram added that the ICT industry would be far more resilient than other industries if a recession occurred due to the need for organisations to re-examine how they did business.

"How do I cater for that change in business model? I need to use, adopt and change my processes. Technology is the enabler in order to do that. The use of technology in such times makes it much more resilient."

Internet Industry Association chairman Bruce Linn agreed, saying that ICT industry had done a good job of learning its lessons from the most recent economic downturn.

"We've learned some lessons and that is that when times get tough, people seek to improve efficiency in doing their businesses and that's a time when the ICT industry will typically do quite well. It's not doom and gloom for the industry in general," said Linn.

Mick Liubinskas, co-founder of Pollenizer, which helps co-found web businesses, said that start-ups in particular had used previous recessions' experiences to create better businesses.

"We are better prepared. We have learned some lessons: look for real value, get the money you need to survive industry or economic swings, and leave enough room to get you through to the long term," he said, adding that unlike the 2001 dotcom bust, start-ups were more careful with their finances.

"Most people now raise as much money as they need and they don't spend it instantly on big Superbowl ads. They keep it up their sleeves, and we look for revenue and we drive more value," he said.

He saw a possible recession as a golden opportunity for start-ups.

"A recession is the best time to start a business because it's the longest gap you have between the next upswing and it's when things are a bit cheaper and people are available. It's a great time to start a new business," he said.

However, even larger ICT businesses don't seem to be overly concerned by the prospect of a recession.

While NextDC founder and CEO Bevan Slattery said it would be a tough second half of the year, he said that the ICT industry as a whole wouldn't be badly affected by any possible downturn.

"I think ICT generally is going to do really well. I really don't see a lot of impact on ICT or telecommunications. People need to invest in IT. When a market turns down, people need to find efficiencies and the first place they can really find great efficiencies are automated processes, or in IT systems. I think it's going to continue quite strongly," he said.

Does a healthy IT industry mean the tight IT labour market will continue? Hays regional director Peter Noblet said that at this point in time it was too early to tell what would happen if Australia slipped into another recession. He said that if it did occur, employers would be much more careful in who they hire.

"I'm not saying they won't hire, but they will just make sure that the people they do hire will [meet their needs]," he said, adding that those that cross-skilled themselves would be much more desirable candidates.

"Employers will be wanting to find people that can add some significant value to the business in whatever they're doing," he said.

Bertram, who also heads up Gartner's business intelligence research team, agreed, saying that there would be a shift towards re-skilling workers in the ICT labour force to incorporate more business-related skills if another recession occurred.

"What you'll start to see in the Australian labour market is a re-skilling into areas like more business processes, business analytics, those areas, rather than just pure technical skills," he said.

Workers let go from corporate power houses may well find work on the start-up front, according to Liubinskas.

"If you need people to take some risks and join a start-up, it's going to be hard to do that if ANZ is hiring them for $300,000 a year, but then if those jobs aren't around then there might be some good, smart people who are ready to try a web business," he said.

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