October 1st, 2008
How is the credit crunch impacting your economy?
The economy is mired in a slowdown, Wall Street allegedly needs a bailout and stocks are on a roller coaster that is mostly headed down. What’s less clear is how all of this turmoil is impacting the tech industry and your personal economy.
A simple question was posed on one of my mailing lists over the weekend: Are you seeing a change in the business climate?
The group, which includes everyone from professional investors to software vendor employees to entrepreneurs to consultants, had interesting answers. The names involved have been stripped out and the responses edited and/or paraphrased, but the exercise indicates that checking the pulse of the tech economy isn’t easy. Simply put, broad strokes and blanket statements need not apply. We’ll know more when tech companies report earnings, but it’s possible that vendors may sound like Oracle, which practically rubbed in the fact it will get your maintenance dollars no matter what (see transcript). Other tech companies will get slammed. And no one is going to make big bets on 2009.
Also see: Can IT spending shift from reactive to proactive?
One thing is certain–the economic waters are turbulent.
Let’s go to the responses.
- “We haven’t noticed any impact–yet.”
- Everyone is talking about the slowdown and that has to lead to a contraction. “Nuclear winter” is a term tossed around a lot among startups and VCs.
- 10 percent to 15 percent of new contracts are being delayed or downsized. The usual rate is 5 percent. Overall, business isn’t that bad.
- Consulting clients are requiring more details around ROI calculations. Third quarter started soft, but ended strong.
- There are material drop offs from private firms to publicly traded giants to accounting, legal and systems integrators. The decline is alarming.
- The business outlook for 2009 is tough. Advertising related companies seeing business drop-off. Across the board folks said predicting 2009 is dicey and large customers are seeing slowing demand.
- Backlog into the fall has been good and customers haven’t cut back dramatically yet. However, small businesses this person deals with daily are seeing tough conditions. (It’s safe to say we’ve all seen that).
- Some entrepreneurs are trying to keep a two-year cushion of liquid funds. It may be impractical, but it’s great peace of mind.
- Business is strong among clients outside the U.S.–even the financial services firms abroad.
- Deals are getting smaller and customers are taking longer to make a decision. Indian IT vendors may be feeling the heat.
What are you seeing out there?
More on the tech economy:
- Analyst: Intel will weather the storm
- Apple: Is it really recession proof? Wall Street says no
- Wall Street’s Pain = Tech’s Gain
- Microsoft says crisis will impact tech
- Zoho bitterness at the credit crunch…and a solution
- SaaS and the downturn
- Can IT spending shift from reactive to proactive?
- Which IT jobs will survive the credit crunch?
- Accounting vs. technology - who’s at fault
- Silver lining: Now may be the best time for SOA startups. Part 1 and Part 2.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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