September 22, 2008

A Test of Resilience and Confidence

By Ahmad Kushairi

IT looks set to be challenging all the way for the global information and communications technology (ICT) industry this year, and probably well into next year.

Earlier this year, research group IDC predicted that global ICT growth would slide from 6.7 per cent last year to a modest 5.5 to six per cent this year.

Another report from Gartner suggested that ICT budgets would hold steady at 3.3 per cent this year. And a survey of IT leaders showed that they are not worried about a recession affecting their business.

But with the situation going from bad to worse in the United States, there could be revised figures to the downside.

Analysts reckon that the latest financial crisis will only add to the slump, as the financial market normally contributes about 20 per cent of technology spending worldwide.

As the crisis deepens, a number of technology companies are already feeling the heat. PC giant Dell, for example, has warned that demand for IT is weakening and that customers are holding back on PC purchases.

Another example, computer products distributor ingram Micro has cut its third-quarter profit and revenue outlook, citing economic softness over the past few months pressuring operating margins.

Several top-tier technology companies also have reported weak third- quarter earnings, which further reflects the negative sentiment towards technology spending among consumers and enterprises.

But not all is gloom. New data from the European Information Technology Observatory showed that growth in the global ICT market is expected to continue next year at 5.6 per cent - which would push global turnover for computers, services and software over the 1 trillion mark for the first time.

Globally, services and software will have higher growth than hardware - above six per cent for both segments, the group said.

Nevertheless, the global economic downturn will serve as another test of resilience for many technology companies, including the local ones. Those that pass this test will emerge stronger and more confident of their ability to face future challenges.

(c) 2008 New Straits Times. Provided by ProQuest LLC. All rights Reserved.