IT sector to ride out the recession through innovation

Firms' long-term survival depends on IT investment

Firms are using technology innovation to fight the recession, according to George Colony, chief executive of consultancy firm Forrester Research.

Colony argued in his blog Counter Intuitive that analysis of how technology markets recovered from previous recessions suggested that the IT sector will not suffer like it did in the last downturn.

He noted examples of transformation processes that firms are already deploying as a result of changes they have experienced due to the economic fallout: JP Morgan integrating Bear Stearns; Bank of America integrating its systems to fit with Merill Lynch; Wal-Mart using social computing to increase customer responsiveness; and FedEx replacing its datacentres with high-efficiency designs.

“When we come out the other side of this crisis, companies will look quite different – and technology will have been a catalyst in those changes,” said Colony.

Colony advised companies to maintain their focus on using technology to interact with customers.

“In a recession, the use of Facebook, Linked In, e-commerce and blogs will increase, not decrease, as people look for jobs, companies stay closer to their customers, and easier-to-ROI internet advertising accelerates,” he explained.

“Companies will have to stay focused on their web sites, social strategies, and e-commerce this time around – or risk losing their next generation of customers,” he added.

Colony said technology spending is unlikely to be cut back ruthlessly because it is already at a relatively low level compared with 2000. Spending is unlikely to “fall off a cliff”, he argued, because “users of technology are far more disciplined and have cut out the nonsense”.

And companies have long-term technology plans in place that are unlikely to be cut back, he added, citing virtualisation, social computing, mobile computing, green IT and service-oriented architecture (SOA).

Technology is too pervasive to be limited, he concluded. “If you don’t believe me, start unplugging wires at your company and see how long you can develop, manufacture, deliver, sell and service your products.”

Readers of Colony’s blog posting generally agreed with his arguments.

“Technology will actually be a stabiliser rather than a destabiliser – that is what is different,” commented Kim Patrick Kobza.

Evan Schuman commented: “Suddenly, line-of-business managers will need that tech magic that will allow them to run stores with 48 people that a year ago needed 76 people."

In a similar fashion Kevin Rose, founder of the community news site Digg, posted a video noting positive impacts the recession could have for start-ups similar to his.

Rose described himself as a “scrappy entrepreneur” and argued it is this type of entrepreneur who will do well in the credit crunch.

“When venture capitalists and Angels pull back, the back of the napkin ideas will not get funded and you will not be hearing about the launch of new start-ups every single day,” he said, explaining this will give really dedicated entrepreneurs more of a chance.

His advice to entrepreneurs with project ideas was to keep their day jobs, make project investments in stages and take baby steps to achieve success.

In related news, recruitment consultancy Harvey Nash has produced research showing the gloom around IT budgets is not worrying software vendors.

A survey of 300 senior executives from leading software firms showed 59 per cent believe their company will be profitable in the coming year.