Economic grind will not stop IT

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Economic grind will not stop IT

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

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This was first published in May 2001

 

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