The big picture of how recession will affect IT industry

The current economic crisis could "overturn the established order" in the global IT industry, according to a UN report.

The current economic crisis could "overturn the established order" in the global IT industry, according to a UN report.

A report from the UN's International Telecommunications Union (ITU) says the recession will challenge many firms, but will also revitalise the industry and allow "new entrants with new technologies to thrive".

While there will be challenges for many, the report predicts opportunities for "disruptive technologies and/or business plans", which are "unlikely to come from traditional players".

The report says, "In some ways, it will reassert the old order with those ICT companies with sustainable business models, stable cashflows and deep pockets regaining some of the ground they have lost to new market entrants. But it will also create new opportunities for firms with disruptive technologies to prosper, especially where prices are falling and where technology is changing."

Better than 2001

The industry is better placed to weather this recession than when the dot com crisis hit in 2001.

"The internet is now a mainstream feature of modern life; global communication networks underpin international trade; and modern working methods are based on constant connectivity."

One main challenge for IT companies is the current lack of available funding. The report says funding issues for innovative ideas are unlikely to be resolved until the banking sector is recapitalized.

It adds governments may even need to step in, saying, "The financial difficulties faced by the private sector could add to pressure for government intervention in the financing of national backbone infrastructure."

Operators

According to the ITU, mobile operators are better placed to ride out the storm than fixed operators, because of greater flexibility in their cost structure.

And the demand for basic IT services is likely to stay robust, while demand for more advanced applications is less certain.

Telecom services will come under greater pressure to fight for cost-focused consumers, and operators will have to cut costs by internal efficiency measures such as reductions in headcount and infrastructure-sharing.

Growing pressure

With demand for broadband capacity expected to exceed supply by 2012 and a funding shortfall exacerbated by the financial crisis, it may be necessary for governments to step in here as well.

The report says, "There is growing pressure on governments to help finance the build-out of broadband networks on the basis that these represent important national infrastructures."

The ITU says investing in innovative technologies during a recession is more important than ever, and could help provide a solution to the problems.

"Investing in innovation and knowledge is even more vital in times of crisis, not less so, and could enable the global economy to navigate its way out of this crisis."

Read more on IT governance

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