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Technology / Crisis
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2009-03-27 23:47:18-04
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IT: Gloomy Expectations for 2009
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Global IT and telecom executives say worse to come, according to Economist Intelligence Unit
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For companies in telecoms and IT, the green shoots of economic recovery are virtually nowhere to be seen, according to the Tech Sector Barometer, a new biannual survey whose results are today published by the Economist Intelligence Unit. Just one in five technology companies expects demand to rise from its current low level over the next six months, while nearly half think it will deteriorate further. Two-thirds say the financial health of tech companies will worsen, and almost four-fifths that R&D activity will stay the same or slacken. The survey, "Sub-zero Confidence," also shows that hardware companies are faring worse than software and telecoms service providers in the recession. Sentiment among computer hardware companies is particularly gloomy, with around 56% saying demand will weaken even more in the next six months and 68% arguing the financial health of companies in the tech sector will worsen in that period. What's already become apparent is that companies and consumers are cutting their expenditure on non-essential replacement equipment, but finding it necessary to keep investing in the software that makes their business run or the services that allow them to communicate. Although there are few positive indicators in this survey, the Economist Intelligence Unit still maintains that the telecoms and IT sectors will cope better with the economic recession than most other sectors. "Debt among the big players is relatively low, many emerging markets are still growing and there are few of the overcapacity problems we saw following the dotcom crash," commented Carla Rapoport, Director of Industry Briefing and Forecasts, at the Economist Intelligence Unit. Yet, as she also noted, "the industry clearly sees little chance of an early recovery". Key findings of the survey: - Pessimism in the sector reflects the growing feeling that a recession could be long-lasting, with only 20% of respondents expecting demand conditions to improve over the next six months. A whopping 46% reckon conditions will deteriorate further. - Sixty-six percent of respondents expect the financial health of tech companies to worsen in the next six months, and fewer than 10% say it will improve. - Weakening demand and falling prices are seen as bigger barriers to growth than lack of finance to fund business development. - New research and development could suffer in the recession, with 44% of respondents expecting activity to slow in the next six months and just 20% expecting the opposite. - North American companies are the least pessimistic about the short-term prospects for the tech sector, with 23.4% saying conditions will improve and only 39.1% saying they will get worse. - Computer companies are more disheartened than telecoms organisations. Around 56% of computer hardware companies reckon conditions will deteriorate over the next six months, while only 40% of companies in telecoms network services feel the same.
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