For Tech, This Recession Will Be Different Than 2001-03: Forrester CEO

Forrester Research came out last month with its formal view of the recession, which was published as Andy Bartels’ report titled ‘What the Financial Crisis Means to the Tech Market’. George F Colony, chairman and CEO, Forrester Research, now gives his insights about the global recession and how it will affect the technology sector.

Tech will be down, but not out

“2001-2003 was a tech depression. Spending stopped, projects were canceled, excess inventory flooded the market destroying pricing. Cisco lost half a trillion dollars of market cap. Why? Tech had a long way to fall. Tech spending in 2000 in the US was up 12 percent – there was fluff and fat everywhere. When the bubble burst, the fall was precipitous,” says Colony.

Looking at recent figures, tech spending was up only 6 percent from 2006 to 2007. This shows that technology users today are far more disciplined and have cut out the nonsense. As a result, Forrester maintains growth will slow, but it won’t fall off a cliff.

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Transformation and innovation will lead recovery

CIOs and CEOs across the world are using tech in innovative ways to find their way out of this mess. Goldman Sachs is scoping best practices in commercial banking (its new world). JP Morgan has to integrate Bear Stearns. Bank of America will be converting and integrating its systems to fit with Merrill Lynch. Wal-Mart is going to use social computing to increase customer responsiveness. FedEx is replacing its data centres with high-efficiency, green 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,” says Colony.

Tech is everywhere

“It’s seven years since the last recession. Technology has become markedly more pervasive in that time – it’s the air we breathe and the water we swim in. Cell phone penetration in the US has tripled in that time; e-commerce has increased by 85 percent. While it may have been ’nice to have’ (and therefore eminently cut-able) back in 2002, tech now sits at the centre of a company’s operations. IT has become Business Technology. 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,” elaborates Colony.

This changed position of technology from a business complement to a business enabler will secure the overall health of this sector during the current economic meltdown.

Customers live on tech

The consumer landscape is very different than it was in 2001. Forrester’s consumer surveys show that each succeeding generation takes more tech into their day-to-day life. The delta between the Y generation (18-27) and the X generation (28-41) is extraordinary – Y spends twice the amount of time on cell phones and half the amount of time reading newspapers. In a recession, the use of Facebook, Linked In, e-commerce, blogs will increase, not decrease, as people look for jobs, companies stay closer to their customers, and easier-to-RoI Internet advertising accelerates.

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

Tech issues are burning

Virtualisation, social computing, mobile computing, green IT, SOA, extended Internet (connecting the physical world to the digital world) are front and centre on the agendas of large companies. With budgetary restrictions having emerged due to the ongoing turmoil, the question that arises is - ‘Will many of these projects get cut back?’ “Yes. But many are part of long-term company plans – they will persist despite economic slowdowns,” says Colony.

Tech suffers when GDP growth stalls – that is always the case. But the tech environment has transitioned since the 2001-2002 hurricane – meaning that this time around the impact will not be as severe.