vol. XVII no. 1

				Technology and the Economy continued And while firms can and do save money by streamlining staff, there are negative repercussions to eliminating jobs. As John Sergo Jr, consultant and assistant professor in the College's computer information systems department, points out, "People remember how they were treated when times were tough. When a service provider cuts half of its workforce, customer service usually takes the hit. The company will then outsource it, and quality will suffer. Then people will vote with their feet." THE BUCKS STOPPED HERE Of course, all forms of spending — consumer and corporate — are reduced in a recession, Businesses have to carefully weigh what to cut back on as well as try to predict what their customers can do without." IT spending can be separated into mandatory purchases, which are disconnected from economic shifts, and emerging or state-of-the-art purchases, which are definitely affected by the economy," Sergo notes. "Telecom providers saw a great opportunity several years ago to get DSL out to homes and businesses, but when the economy went down, DSL fell into the category of discretionary spending. People didn't want to spend on it." According to Drummond, "As the economy declines, people need less capacity in everything, including IT. That's just a natural result. However, there's often a lag in timing from downturn to downsizing technology." Sergo agrees. "Talk to telecom service providers, and they'll tell you they're the last to shut down in a recession and the first to start up. That's because IT projects like networks are planned on a long-term time frame, something like eight months to a year. If there is an economic setback during the course of a project, it's too late to respond. Around 80 percent of equipment costs will have been paid a month after the order was placed. When the economy improves and budgets ease, IT projects are taken up again because there is a much smaller portion left to pay to bring them to completion." GEARING BACK UP ''Some analysts suggest that a strong economy gives companies the means to invest in IT Others believe that investment in information technology makes companies more productive and in turn is a significant factor in stimulating the economy," comments Senn. Whatever the case may be, the U.S, Department of Commerce's Digital Economy 2003 reports this general good news: "Renewed IT investment and strong if selective growth in IT-producing Industries have helped the sector reassert its role as an engine of economic growth." "Companies didn't invest in IT in the last several years, but now they're reaching the limits of what they can do with their lnstalled technologies. They're replacing systems, upgrading software and buying IT-related services," Senn says, ''These actions are triggering an upturn in the IT sector." Sandra Bergeron is executive vice president of corporate development and strategic research for Network Associates, a leading provider of network security solutions. When asked about her perspective on the economic recovery, she notes, "Businesses are cautiously optimistic. Spending has loosened up in the last several quarters, partly because if firms don't use it — amount budgeted for IT — they'll lose it." "Spending may well return to pre-recession amounts,'' comments Sergo, ''but with a different focus. It will be more about integrating systems throughout the enterprise." "If you look closely at the IT industry, you'll see 2004 as a good year ahead for two major reasons,'' Ackinson explains. ''First, the recovering economy puts money back into IT's pockets. Second, manufacturers like Dell and Gateway are expanding their pro, lines to handhelds and home appliance integration. This will create new opportunities for software developers and solution builders." NOW AND LATER While good health is returning to the technology sector customers are understandably cautious, "Feeling a little better about the economy doesn't have a direct, immediate effect on behavior Our clients continue to reduce the scope of prod they purchase and negotiate hard on price, and that behavior going to change anytime soon,'' Bergeron comments. On the bright side, Ackinson sees big developments or the horizon. "This will be a period of great innovation as developers work to make relevant information available anytime, anywhere so that we can get a signal wherever we go. Americans are I in a garden of opportunity. We live in that one place on Earth where the big ideas emerge. New jobs will come from innovative thinking. The innovations we create here in this country are significant solutions to significant problems. Other countries what we have and want it.'' Top | Back to Beginning Back to main "A Sign of Four" page.

Copyright © 2004 Robinson College of Business/Georgia State University.