The grind-down in the IT supply sector is receiving attention from
a worried press and is even being accused of leading the economy
towards recession.
This is the opposite of what is really happening. IT spend is
directly proportional to gross domestic product (GDP).
User IT spend growth is about four times GDP growth in both the US
and the UK, so any change in the general economy is amplified
fourfold for the IT industry. That is good for suppliers in an
upswing of the general economic cycle, but not in a downturn.
The 5% fall in business growth in the US has triggered a
headline-hitting 20% slowdown for IT suppliers. The CBI's recent
warning that growth in UK GDP could slip down to 0.5% to 2%
represents a possible 2% drop in IT sector growth.
IT users have only a limited pot to spend and are under heavy
internal pressure given the disproportionate spend enjoyed by IT.
Squeezes on licences and upgrades simply mean that less money is
available for new areas, such as e-business.
Many suppliers could plan better if they appreciated that users are
spending according to the economy.
Despite everything, the UK IT market's 10% annual growth outstrips
that of most industries. That is very strong. Just ask any
hotelier.
John Riley