'Heebeegeebees' Slowing Tech Spending

Jun 19, 2012

Pam Baker

Depending on whom you ask the IT market is up, down or holding steady. Cisco publicly warned of a slowdown and Juniper and Alcatel-Lucent reported earnings that clearly indicate the braking system is engaged but not screechingly so.

Gartner says down, CDW says up

Gartner keeps readjusting its 2012 IT spending forecast downward but according to the latest CDW IT Monitor, IT spend is up.

So what does all this conflicting information mean? They can’t all be right, can they? Yes, it turns out, they can.

“Is the state of IT growing? Absolutely!” said Jim Melvin, CEO of AppNeta, a network performance management provider. “Are organizations spending more? Not necessarily.”

There are the expected peaks and valleys in IT spend where one category of goods and services are favored over another, where hot trends and scheduled refreshes spike the charts, and where long awaited repairs and upgrades, now long done, provide the dips. But after you make adjustments for each of those things, a truer -- and stranger -- picture emerges: The IT market has a clear case of the heebeegeebees.

What’s scaring IT buyers?

The heebeegeebees, lest you not be familiar with that highly technical term and somehow missed the original Madagascar movie, is that feeling of adrenalin rushing up your spine when you are scared.

Yes, the market is scared. Which begs the question of why are they scared if the economy is in recovery and they still have cash on hand from all the slashing and cutting and dicing they did earlier to jettison costs and debts. Just a few months ago they spent hardily but now they spend squeamishly. What changed?

“We believe the drop isn't significant enough to indicate another technology sales bust like the one in 2008,” said Peter Gracey, President, COO and co-Founder of AG Salesworks, a provider of sales and marketing outsourced solutions for technology companies.  “We more strongly feel this down swing is a sign of companies tightening belts and slowing down the general level of purchasing as events in Europe and our own election results unfold.”

Yeah, large companies are not the brave sort as a general rule. They don’t mind taking risks, but only if they are controllable and calculable and there’s none of either in the European economic crisis or the current U.S. political climate.

Enterprise can and will cope with either Obama or Romney as president but they want to know which administration they have to cope with before they embark on anything else. As to the European crisis, there’s little hope of sorting out the odds on that one, so many companies think it better to just wait it out. Throw in concerns over the impact of a possible housing bubble burst in China and, well, covers get pulled over heads and the closet light gets left on.

So here’s where the market is now: on Heebeegeebee Hold for the most part with some upswing on one end and some downswing on the other.

IT debt is rowing scary too

Debt is a funny thing. In good economic times, it is seen as a usual cost of business, even a good thing. In sketchy economic conditions, debt is more commonly viewed as a venomous snake, coiled and ready to strike. In a state of the heebeegeebees, debt is largely viewed as a nasty bugger and well avoided. Yet companies tip toe around it anyway.

"Based on a recent survey we conducted alongside Vanson Bourne, we can discern that IT spending and debt is rising," said Stuart McGill, CTO at Micro Focus, an enterprise application modernization, testing and management software company. "Nearly 75% of U.S. respondents who participated in the study have already or plan to deploy apps on mobile devices within the next year. Additionally, nearly 75% of U.S. respondents plan to move applications to the cloud within the same timeframe. These results show us that despite the costs of making IT purchases, companies are continuing to invest in their IT infrastructure."

Tech investments that are being made are coming at other costs, too.

“There are also several corporate entities such as IBM, Cisco and HP that are mandating mass layoffs,” said Mike Barefoot, senior account executive at Red Zone Resources, a staffing firm.  “This tends to have a trickle-down effect and affects small to mid-size companies that become less inclined to step out on the ledge and invest toward resources they definitely need. The companies that will still hire during these circumstances tend to protract the hiring pace and extend out the decision and hiring process."

Redirection of IT spend

Should all this be worrisome to IT buyers or to vendors? Not really, as the heebeegeebees will pass relatively soon.

“I think perhaps more interesting is where IT spending is shifting to,” said Matt Fates, partner at Ascent Venture Partners. “IT spending is massive annually, probably north of $1 trillion in the U.S. alone but it is not growing all that much overall.

“That said, I would expect to see real shifts in where the dollars are being spent. For example, from legacy systems towards cloud based solutions.”

So, yes the IT market is growing in places where enterprises see a way to leverage the technologies they already own or to fill in money pits. Cloud, mobile and Big Data management are on or at the top of most shopping lists. A lot of everything else is on hold for the moment, or drastically under-bought.

Once the reasons to shudder pass, spend will likely quicken again as companies seek to make up for lost time.

A prolific and versatile writer, Pam Baker writes about technology, science, business, and finance for leading print and online publications including ReadWriteWeb, CIO and, Institutional Investor, Fierce Markets Network, I Six Sigma magazine, CIO Update, E-Commerce Times, and many others. Her published credits include eight traditional books, a smattering of eBooks, and several analytical studies on various technologies for research firms on two continents. Among other awards, Baker won international acclaim for her documentary on the paper-making industry, and is a member of the National Press Club and the Internet Press Guild (IPG). She lives in Georgia, USA with her family and two dogs.



Tags: IBM, Cisco, HP,

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