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Stop Waving the Red Flag

The past few weeks have undoubtedly caused trepidation, angst and downright fear in the business world. With global bailouts under way, increasing job loss, and declining stock markets, the IT sector is wondering where it fits in with this mess.

Some media of late have indicated rough times for IT. However, we are heartened by what we’re seeing from analysts.

While groups such as Gartner have recently downgraded their outlook for technology spending, these downgrades aren’t as bad as you probably think. Gartner still says IT spending will increase 2.3 percent in 2009. That figure is down more than 100 percent from previous estimates. But given the recent credit crisis, 2.3 percent growth isn’t bad at all.

In fact, the 2.3 percent increase is a “worst-case scenario,” according to analyst Peter Sondergaard, who was quoted in the San Francisco Chronicle. Forrester Research has actually issued more bullish projections (albeit a lower “worst-case scenario.”)

The current economic situation is often compared to the 2001 recession. However, at least for technology spending, there is no comparison to those dark times. “This is going to be extremely mild in comparison,” says Forrester analyst Andrew Bartels.

What all of this is really going to mean is that IT is going to have to do more with nearly the same resources. Let's face it. Regardless of flat or reduced IT budgets, companies are going to continue to expand their businesses. And that is going to mean new revenue-generating applications and supporting infrastructure that will need to be deployed and managed by IT. To support this, IT will have to review existing processes and procedures and eliminate non-essential steps and optimize as much as possible.

The next thing they are going to have to do is look for ways to automate time-consuming, labor-intensive tasks. This will be a tremendous opportunity for innovative vendors who can provide automation solutions with "no-brainer" pricing. It will be an interesting time for such vendors.

With these strategies in place, IT operations can thrive in a down economy, despite what some media are saying. In NASCAR, there are many flags to alert drivers of racetrack conditions. A red flag, for instance, means “end of race.” A yellow one means “caution.”

Too many people are waving the red flag. We believe it is time to get the yellow flag back on the track.

Are Things Really This Bad?

The chaos witnessed over the last two weeks in the financial sector—and the resulting bailout brouhaha—sent shockwaves on Wall Street and consumers throughout the country. Money markets slowed. Stock markets plunged. Combine these headlines with rising fuel prices and rapid job loss and the question of whether or not we’re in a recession seems pretty much answered.

As for job loss, Chicago-based corporate consultant Challenger, Gray & Christmas says firing announcements rose by more than 20,000 in September compared to the same month last year.

Wow. Seems like the IT industry could be facing some serious trouble. In fact, Bloomberg reports computer companies “led industries in announced reductions” in September with 25,715. Computer companies’ planned cuts even surpassed the troubled auto industry (14,595) and financial sector (8,244).

But wait a minute. Of those 25,715 planned computer company job cuts, 24,600 came from ONE company—the troubled Hewlett-Packard. That’s roughly 96 percent from a single source. When you say “computer companies nationwide are planning to reduce 1,115 positions” it sounds pretty minor, doesn’t it?

Then there’s the tech-heavy NASDAQ index. It dropped 200 points last Monday! However, a better examination of the NASDAQ would be to compare dates before talks of the bailout. When you compare Sept. 26 of this year with the same day in 2006, the NASDAQ dropped only 78 points. Comparing Sept. 11 with the same day two years ago, it rose 85 points.

Our economy is clearly in a downturn. And the IT market will undoubtedly be affected. But IT, compared to other industries, is still in pretty good shape. As we’ve written about before, companies are still overwhelmingly planning to spend more on technologies such as virtualization and virtualization management. These technologies, IT managers are starting to see, help save money by reducing infrastructure and minimizing manual troubleshooting.

These benefits are even sweeter during a downturn. Or even a recession.