Call it a slowdown, a downturn, or the dreaded "R" word, worries about the state of the US economy have increased across virtually all sectors save one: technology.
But has IT -- like the Mafia and the US military before it -- succeeded in becoming recession-proof? Certainly not. A survey of the current IT landscape, however, suggests that tech departments are well prepared to weather whatever comes their way in the next year, and that IT -- thanks to lessons learned from the last downturn -- is much more resistant to economic uncertainty than it once was.
Much has changed since the dot-com implosion and subsequent recession of 2001 and 2002, when the tech sector took a huge hit and many IT jobs were cut. Today, tech companies are faring better than the economy as a whole, with eight of the top 20 tech vendors exceeding Wall Street estimates for the first quarter of this year. More importantly, US corporate tech budgets will rise 2.3 per cent this year, according to Gartner -- a dip from the research firm's earlier prediction of 3.3 per cent, but still near the 2.8 per cent growth IT has averaged since emerging from the doldrums in 2004.
The major shift for IT during the past few years has been a much sharper focus on cost containment and ROI, not to mention significantly leaner staffs. Thanks to IT practices such as SaaS (software as a service), outsourcing, and virtualization, the cost of obtaining essential IT services is much lower than in years past. Most important, technology is now viewed by virtually everyone on the C level as a key strategic component of business success. Enterprises that slash their tech budgets could end up cutting their own throats.
IT projects: Fast, cheap, and in control
IT is a much different animal than it was during the last downturn. The white elephant in the room -- the big CRM or ERP project that was going to revolutionize the company and is now hopelessly late, over budget, and mired in political infighting -- isn't there anymore. Like Elvis, it left the building a long time ago.
In its place came smaller, nimbler, more focused projects that had to deliver on their investment or end up red-penciled. So cost-conscious company controllers looking to trim fat off the IT budget this time round may be forced to look elsewhere.
"In the past, there was clearly a 'build it and they will come' mentality," notes Guy Fardone, CTO of Evolve IP, a managed technology provider. "Everybody got caught up in that. That's not happening now."
At the same time, it's also a lot cheaper to fulfill IT functions than it used to be. The rise of SaaS and the emergence of flexible licensing agreements have made it possible to get the same work done for far less money, adds Fardone.
"If your business is growing and you need Oracle financials, you don't have to spend X dollars per CPU to get it," he says. "You can buy it in a license agreement that didn't exist five years ago. So you end up spending a few hundred thousand instead of a couple of million. I don't think CIOs or CTOs have ever been in as good a position as they are now. There are so many ways to do the things you need to do without spending the kinds of dollars you had to in the past."
Still, companies in cost-cutting mode will likely put off more ambitious IT projects for those that promise a faster return on investment, says Bob Riddell, senior director at Alvarez & Marsal Business Consulting.