Skipper Sees Another Year of 'Tough Sledding' for Big Tech
01/07/03 - 08:20 AM EST
Stephen Schurr
2. So they're doing better on the cost-structure side, but what about demand?
On the demand side, 2003 is likely to be better than 2002. How much better is hard to say. On average, I don't think it's going to be much better. What you're going to see is a very large standard deviation. So, you would expect average growth will be very low, but some people are going to benefit disproportionately. People don't buy a little of everything, except when they aren't buying anything. Companies have gotten their IT spending down to a much lower level. Now, let's remember one of the rules of enterprise sending: It's a capital expenditure, which means it comes out of profits. In the last three years, there hasn't been much in the way of profits among Fortune 500 companies. People have been cutting costs and headcounts willy-nilly to get their cost structure in line. Tech's been an easy place to cut back because the budgets were bloated, a lot of the things they were buying weren't providing a decent return on investment and, if you will, people wanted to just put it behind them. Now, companies are deferring some projects that probably are very viable. They're doing so because corporate politics currently is more driven by the cost side. But if you read the data, the economy is starting to perk up a little bit. If you get two or three quarters of expansion even a little bit, you'll get companies saying, OK, we're past the bottom. I can gain competitive advantage through technology. What can I do to do that? I think this will start as a trickle, not a flood. I don't expect anything like ERP [enterprise-resource planning] or Y2K in 2003 and maybe even in 2004. But some companies are going to start using new tech spending to gain competitive advantage.
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