What can the channel expect from a slowdown in IT spending?

Research conducted by analyst firm IDC indicates that the Australian economy is poised to slide into a recession.

Just how much impact this has on the ICT industry will depend on the types of services or products a company provides.

Those with a hardware play will be hardest hit according to the new study.

Vendors will experience slower sales and price rises will more than likely be passed down into the channel as a result.

Software is expected to suffer the same fate, although virtualisation offers a ray of hope as companies look to cut costs and minimise hardware investment.

There is bad news for smaller resellers though as companies tighten their belts and halt spending and purchases of applications and operating systems.

In another IDC study, global PC shipments have been shown to have failed to meet expectations.

Low-cost PCs such as netbooks have helped to drive sales as a whole, however their reduced price is cutting into the margins of smaller players.

Jay Chou, research analyst with IDC’s Worldwide Quarterly PC Tracker, said the PC market will face stiff competition from cheap notebooks.

“The proliferation of low-cost portable PCs coincided perfectly with market conditions. As more low-cost models enter the fray, a new pecking order may emerge among vendors as the market leans toward notebooks with ever-declining average selling prices,” he said. “It remains to be seen how much cannibalisation will occur, and the degree to which mounting economic pressures will stifle PC market growth over the next year.”

Gartner has echoed these sentiments, claiming that IT spending is set to experience rapid cooling next year.

Gartner has lowered its spending forecast from 5.8 percent earlier in the year down to an expected 2.3 percent.

The firm has cited a raft of global economic problems as expected to an impact on IT budgets.

However Peter Sondergaard, senior vice president at Gartner and global head of research, said that IT spending decreases have been shown to be at least two quarters behind the economy.

Jean-Marc Annonier
Research manager for IT spending, IDC

My view is that there is going to be a recession. Whether it’s mild or not we will see, but there is no question in my mind there is going to be one.

Hardware is going to suffer most.

Costs are going to go up next year and there will be constraints on budgets as well. We are only going to see spending that will help cut costs.

Obviously hardware is not a good candidate for this because of the drop of the Australian dollar.

If you combine smaller budgets and higher prices it’s not a good combination.

There will be pressure on CIOs to do more with less such as pushing back on the refresh of PCs and trying to fix things with only operating system refreshes or reimaging instead of replacing machines.

Software is in the same case.

There is no good reason why businesses will be moving to the next version of Office or Vista next year because it is not productive as you need to retrain a lot of people.

That software is not very well adopted in the marketplace yet.

So they will probably stick with the older versions, especially if they stick with the older hardware as well.

Basically, everything that is cheaper and meets basic needs will continue to do well.

There will be a push towards outsourcing and management to lower costs and obviously this is not very good for the channel.

Businesses should slow down and see how they can improve things because they are going to be less busy.

It’s a good time to reassess things and see what we can do better.

Good times are going to come back.

Matthew Drane
Managing director, D2K

Since the commencement of the bailout package in the USA and the talk of recessions, small business as much as anyone is paying attention.

The talk is very much to batten the hatches and turn ad-hoc income into subscription or somewhat guaranteed recurring revenues to help weather the storm that is brewing.

Although this does seem doom and gloom, it’s also a great chance to revisit what built this great country. Instead of training, we “borrow” each other’s staff and retention is attached to a pay cheque rather than corporate conviction.

D2K is somewhat fortunate that as a group we bridged the business into managed services.

We also shored up other areas of our business in the print and document management sectors which allows us to remain relatively stable as these troubled times approach.

The positive in this whole situation may be about getting back to grassroots.

It is my belief that more time should be spent with clients.

Clients will start demanding more value and this I believe will come in the form of information, not just the delivery of technology.

Education will be key.

The takeup of new technologies such as Vista, VoIP, SAN and virtualisation will all need the old-fashioned sit down rather than the ”just use it, it’s great” approach.

Take the time to talk with the distributors you deal with, review your budgets and adjust accordingly, lock in credit terms and revisit the telco bill to see what can be saved.