IT sector will survive downturn: analyst

Despite the surprising plot twists and turns the economy and capital markets have been experiencing, IT's next chapter will have a happy ending, according to RBC Capital Markets software research managing director David Beck.

Speaking at a CIO Summit business and technology forum in Toronto recently, Beck said successful companies will use the current economic downturn to solidify operations and prepare for a recovery. Beck disputes the argument that the value proposition of IT has diminished, claiming that its strategic importance will only increase due to "relentless" technology evolution.

"Consolidation is the course of the day; CIOs will need to maintain and strengthen the IT supply chain," Beck said.

He also said September 11 has forced companies to make security and backup a top priority, which in effect has given IT execs more political clout and more resources within their company. Companies will need to focus on standardising the application environment, integrating customer relationship management (CRM) and enterprise resource planning software (ERP) tools effectively, and leveraging enterprise data assets.

"Security was challenging enough when companies had to deal with secure PCs. But now you are going to have to worry about secure PCs, secure PDAs, secure mobile phones -- that's a lot of complexity in terms of the security equation. A lot of companies right now are looking at their infrastructure and asking about how to get better leverage," Beck said, adding that increased spending in software technologies will be fundamental to growth.

"Over the last couple of quarters, the investment in Internet services declined -- Internet services are extremely capital intensive. There's been a big pullback in that kind of spending, but software continues to move steadily ahead. I think we are going to continue to see very healthy software alternatives come to market."

Looking forward, Beck noted that the correlation between labour productivity and IT investment can be used to justify increased IT spending, particularly in these economic times.

"We were using this as a big supporting argument for investment in IT throughout the late 90s and it has hit a couple of bumps in the road lately. [But] I think that a lot of people are going to go back to it," Beck said. "I think that there have been huge gains in the past couple of years, in storage, processors, and Internet hosting and traffic - it's pretty exciting stuff."

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