Hard Times Could Create a Tech Boom - NYTimes.com

Technology isn?t letting a good crisis go to waste.

The crisis is global economic uncertainty, which several tech companies and analysts say is crimping spending by corporations. That enterprise spending still represents most of the tech industry. If the corporate restraint gets too severe, it can cause a recession not just in tech, but in the global economy.

It could be the kind of recession that brings hard times to tech, but also forces important changes to how business gets done. Historically, that is the kind of pain that also means renewal, and long-term economic growth.

Signs of the pain are abundant. On Thursday, the European Union confirmed that Europe was still in recession and indicated things could get worse. Dell reported that third-quarter revenue fell 11 percent, and net income slipped 47 percent, as businesses, governments and consumers walked away from Dell?s traditional business of personal computers, laptops and servers. Europe was the worst-hit region, but nowhere looked good. On Tuesday, John Chambers, Cisco Systems? chief executive, said during his first-quarter earnings call that nervous companies were holding cash, wary of spending because of both Europe and a possible budget crisis in the United States.

The research firm Gartner, meanwhile, projected that worldwide enterprise spending on information technology, or I.T., would amount to $2.679 trillion in 2013. While that is a 2.5 percent increase from what Gartner thinks companies will spend in 2012, the increases were largely concentrated in finance and media, and were contingent on both Europe and the United States avoiding fiscal crises.

So where is the good news in all this? Gartner also said that ?most enterprises have already significantly cut discretionary I.T. spending growth over the past several years.? Barring an economic apocalypse, the firm said in a statement accompanying the study, ?they have little room to reduce I.T. spending further over the long run.?

In addition, what happens in finance and media often affects other industries. Finance buys things while they are still expensive and cutting-edge, and the rest of us get it later, once the prices come down. Media, which shapes communication and perception, sets a standard for how other companies communicate. Video calling, for example, is becoming commonplace in lots of businesses.

If companies are constrained, but have no choice but to invest, that makes it likely that they will increasingly choose to go through the hard work of adapting their internal systems to accommodate new kinds of technology. It is hard to get people to change behavior, even when there are economic incentives. Often it has to be economic necessity that forces change.

It was, notably, the recession of the early 1980s that forced companies and individuals looking to start their own businesses to adopt PCs. The downturn in the early 1990s led to widespread adoption of client-server technologies, which enabled companies to eliminate layers of management.

The move this time is to cloud computing and mobility. Clouds make the management of resources more efficient, and cut down on the number of people needed to make a corporate I.T. system run. Mobility, as most readers are probably aware by now, makes it possible, even expected, to work anywhere. Those are the new productivity builders, and we all have to get used to companies designed around them.

These are already the fast-growing areas of struggling older tech companies. Cisco?s old-line switch business, still its largest segment, had a 2 percent drop in revenue on the quarter, while its wireless, data center and video businesses all had double-digit gains. On Sunday, Cisco announced it would spend $1.2 billion of its $45 billion in cash to buy Meraki Networks, a cloud-based networking company.

Dell?s stock fell 9 percent Friday morning, after its debacle with PCs, but Dell also turned around and bought a company called Gale Technologies, a specialist in data center management, for an undisclosed sum.

Even if Dell and Cisco cannot move fast enough to make up for declines in their core businesses, others will benefit. The next big changes in business are already here.

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This post has been revised to reflect the following correction:

Correction: November 18, 2012

A previous version of this post was unclear on the amount of increase the research firm Gartner expects in worldwide enterprise spending on information technology in 2013. The correct amount is 2.5 percent, not 2.5.

Source: http://bits.blogs.nytimes.com/2012/11/17/hard-times-could-create-a-tech-boom/

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