VARs Urged to Focus on Reducing Customers' Costs

IT spending recovery is at least a year away, according to a new survey from Computer Economics. For channel partners, survival depends upon making business customers more efficient.

January 7, 2009

Al Senia

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With a recovery in IT spending at least a year away, channel partners should emphasize solutions that help businesses operate more efficiently, according to the results of a new IT spending survey from research firm Computer Economics.

“Capital spending and product sales were already soft leading into this recession, and most solution providers have already adjusted to this environment," said John Longwell, director of research for Computer Economics, an IT research and advisory firm based in Irvine, Calif. "What our analysis tells solution providers is to continue focusing on services and solutions that help IT organizations reduce costs and become more efficient. They should be in a good position to survive and expand their businesses once the recovery begins, perhaps early next year."

The Computer Economics IT spending analysis found that IT spending should recover more quickly from the current recession that it did in 2001. In part, that is because IT managers have throughout this downturn been more conservative in their IT spending than in the past, according to Frank Scavo, president of Computer Economics.

"If the pattern of recovery holds true today, we should see a modest increase in IT equipment and software investment in 2010," said Scavo, who noted that the current recession is tied to financial sector and credit lending issues, just like the previous 1990 recession.

For VARs and other channel partners, that means developing a survival strategy that centers on leveraging technologies such as managed services, cloud computing and data virtualization that help businesses reduce overall costs. When the expected recovery begins in 2010, channel businesses would them be positioned to capitalize on the new cycle of technology spending.

 "IT spending should recover quickly, although we don’t anticipate a return to high growth," said Longwell. "Areas like data center automation, cloud computing, open source, legacy system modernization, and virtualization will continue to see investments. Organizations are also looking for ways to reduce help desk, desktop support, and software maintenance costs.

Computer Economics' "IT Spending in Recessions: 2009-2010 Forecast" study surveyed 200 IT executives in companies with over $50 million in revenue. The firm has conducted surveys of IT spending and staffing trends since 1990.

The findings come as organizations continue cost-cutting measures and staff reductions begun in 2007 to cope with an increasingly challenging economic climate. A November ChangeWave research report, for example, noted IT spending projections for the last quarter of 2007 were the worst since 2001.

According to Scavo, the 2001 recession was tougher on IT vendors due to overspending on equipment and software in the latter part of 1990s. The collapse of the Internet bubble and dot-com crash then dumped a great deal of IT equipment, especially communications gear, into the secondary market.

Going forward, the 2010 forecast for the IT equipment and software segments shows between 5 percent and 10 percent growth. Tech capital budgets will reflect a rebound of 4 percent to 5 percent, similar to rates in 2006 and 2007, Scavo said.

A higher rebound in capital spending could happen with continued low interest rates and stronger credit lines, according to the report.

(Information contributed from InternetNews.com.)


TAGS: open source,cloud computing,virtualization,IT spending,Computer Economics

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