Financial Crisis Starts to Bite IT Industry

Last week, the IT research firms Gartner and Forrester were still claiming that IT wouldn't be hit that hard by the current financial crisis, according to an article this week in ComputerWorld.

However, I think all IT industry forecasts - and Gartner's and Forrester's were highly optimistic in my opinion - are being overtaken by events.

Last week, for instance, a story in the New York Times said that the credit crisis is starting to affect Silicon Valley which has long thought itself immune from economic turmoil. As recently as two weeks ago, financiers in the Valley said they were not particularly worried. However, not only is money for start-ups now becoming more scarce, but investors are doubting that consumers are going to be shelling out money for consumer electronics in any meaningful way during the upcoming holiday season and probably into next year.

Then yesterday, eBay announced that it was laying off 10% of its workers and is going to eliminate open positions. The management consultancy Accenture also said that it was cutting jobs in Britain. SAP also said yesterday that demand for its products had slowed considerably from expectations. SAP too has put into place a hiring freeze.

Also, in a story about SAP's problems in today's Wall Street Journal, there was also an item about a poll conducted late last week by the CIO Executive Board (a group of over a 1,000 CIOs) which found that "not only are [CIOs] under pressure to shrink their budgets for 2009, but they're trying to cut costs before the end of 2008."

I think you will be soon reading about many companies shrinking their IT budgets considerably, and as a result, IT companies getting into trouble, with hiring freezes and layoffs following soon afterward.

Given all this, I also don't give much weight to those hopes about the current financial turmoil encouraging more students who were thinking about going into finance to go into computer science instead. IT doesn't look like much of a safe haven either.

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Willie D. Jones
 
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