With little sign of recovery, IT budgets remain tight for 2010. IT directors are being asked to reduce their spending even more, having already slashed projects, culled staff and squeezed operational expenses to maximise their meagre budgets.
The cuts not only affect the profitability of IT software and hardware firms, but also impact their ability to innovate.
Should IT directors be concerned? On the one hand, suppliers need to appreciate the difficulties their customers are facing and tailor contracts and products to match the current level of spending, no matter how small the budget. However, leading-edge technology is never a cheap option. IT companies that innovate offer businesses a compelling reason to buy their products over a rival’s offering.
Smaller firms are the lifeblood of the British economy. The UK has a strong IT sector built on smaller, specialist firms along with a handful of global suppliers. The smaller IT companies have the agility to adapt and customise their products quickly to fit customer requirements, leading to a faster return on investment and a closer match between IT and the business drivers.
IT directors are in a position to secure the future of these companies by continuing to buy their products – or even taking an equity stake, if the business case is justified.
Unless IT directors support smaller IT companies, these firms will not be in a position to invest in research and development, their unique selling point will be eroded, and they will either be acquired or go out of business.
This is not purely an altruistic gesture, like supporting the local corner shop instead of buying groceries at the supermarket. It is essential to prevent a thriving UK IT industry from turning into a monopoly comprising global players, where individual customers risk losing their voice.