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Tuesday, October 28, 2008

Tech : No Sunset

Forrester Research CEO George Colony, argues that the impact of current economic crisis on tech may be milder than anticipated compared to what happened seven years back with the dot com burst. His primary argument is that tech spending is currently hovering around 6% whereas it used to be double that in the last tech downturn. He points out that tech is more centrestage and pervasive that what it was at the start of this century. Mobile penetrations have tripled in the US, online business is surging around the world. It confirms the earlier notion that IT is business. A well articulated argument here shows that the impact may not be felt where the deployment is critical to business and bound to strengthen additional investments. Tom Sullivan compiles the view that startups could particularly get affected due to the credit crisis.
I liked the logic that George has taken in constructing his idea. Besides the enterprises, the younger generation have their world more or less centered on tech in many ways. As I see it, the millennial generation has emerged as a powerful political and social force. Currently including young people up to 29 years of age, the millennials are the largest generation in history; they are independent-politically, socially, and philosophically-and they are spearheading a period of sweeping change in America and around the world and are clearly more tech centric that what was the case few years back. The Green efforts that many forward looking enterprises are embracing are going to further embed tech into core business.
Global rollouts, instances consolidations and the likes provide IT with unimaginable importance within enterprises. Its impossible to think of the birth of some sectors like what we see today without conceding a central role to IT. A Fedex, Walmart or trading rings as we see them today, can’t be even thought of without IT. The web has stroked the fire and the dot.com companies( or their peak valuations in their heydays!!), no doubt made people sit . I heard someone say that if their enterprise systems fail to perform for a few days, their entire annual earnings would be wiped away. Sensible boards insist on a credible CIO to get hired and no wonder we see that CIO’s also get fired faster. As I see across verticals, increasingly the competitive edge is just going to come out of Innovation and IT would play much more significant role in making this happen. In practice, I see that firms that are under investing in technology lose their edge over a period of time. I am not saying that every major initiative would directly contribute to competitiveness, but not trying would definitely harm them.
Though there may be a potential dip in tech interest for a few quarters due to credit squeeze and overall economic slowdown, I see tech playing a much bigger role in the global business bounce back, when it happens. The tough environment would force tech ecosystem to innovate more and do it fast. No doubt - more of the same won't work for ever and the tech sector is not immune to this. Resource allocation challenges may abound, but in many instances, IT investments deliver more value to a company’s top and bottom lines—by creating distinct efficiencies and increasing revenues—than any potential/real savings gained from the more traditional IT cost cutting. Downturns give companies a chance to buck conventional wisdom and increase their IT investments. Savvy enterprises know that focussed initiatives in many areas can generate more efficiencies and contribute to revenue growth that would outshine potential savings from peanut butter spread model of direct cost reductions applied to IT as part of across the board cost reduction. Yesterday, I was in a meeting, where the discussions were hovering around specific areas where tech can play a major role in the transformation of the financial services business. Clearly, it is not a panic situation – in a few quarters the difference would be seen by all.

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