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Is this 2001 all over again? 20 January, 2009

Posted by Jay Ball in Uncategorized.
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The Economist has an interesting (and reasonably uplifting) article comparing the bright shiny new recession of 2009 with the been there, done that tech crash of 2001.

In a nutshell, the article describes how in 2001 the technology industry ‘imploded’ going from 16% growth in 2000 to a 6% decline in 2001. In comparison, Forrester predicts IT spending to decline 3% in 2009 – and when currency weighting is taken into account this could actually mean an increase of 3%.

Now of course it would be a reckless person who breaks out the Champagne just yet. These are, after all, just predictions. But, so far, this time feels different from 2001. In that year, we had one of our best first quarters ever. Then, at the beginning of April, everything stopped. And I mean everything. Scary isn’t the word.

So far this year, and we are let’s face it not even out of January yet, we’re busy. Clients are kicking off new programmes that will see us remain pretty busy into the foreseeable future. Friends at other B2B agencies are reporting being pretty stacked too.

The Economist article points to the fact that last time round, IT companies had arguably oversold to the market (Millennium Bug anyone?) and helped inflate a bubble that then burst spectacularly. These days, IT departments are less prone to throwing money at problems and don’t have the reserves of kit to fall back on. As such, they need to keep investing to deliver against critical business requirements (which in places are becoming more critical by the day). The article quotes Mark Raskino of Gartner as saying ‘IT is certainly not sacrosanct, but fairly low on the list of things to cut.’

The winners in all this, according to the Economist, are likely to be the software as a service (SaaS) companies and open source software providers. I’d add in that green tech providers may also do well as long as they can communicate the cost benefits of going green over the perception that it is a nice to have luxury that boosts companies’ CSR activities.

We’ll see if the predictions hold true. So much depends on how long this ride will last for and how deep it will go. But, I’d maintain that technology is still one of the critical means for businesses to create a tangible competitive advantages. And the tech companies that stay the course, who demonstrate their relevance and who offer tangible benefits to customers (not simply hype and jargon) will come out strong in the innevitable upturn.

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