Economy

Stock market turmoil leads to tech confusion

Molly Bernhart — Tue, 25 Nov 2008 15:52:12 -0500

The last few months have produced more clouds than silver linings for almost every U.S. economic sector. In October the S&P 500-stock index fell just over 18 percent, according to Standard & Poor's Equity Research, making it the third-worst October in 79 years.

November typically begins the strongest six-month stretch of performance for the stock market, says the S&P's Sam Stovall in a BusinessWeek.com article. Although most of November continued like October's roller coaster ride, some breakthroughs this week appear to be bringing stability to the market. Thanks to President-elect Obama's appointment of an economic team and the government's lifeline to Citigroup, things are looking up heading into the holiday season.

The IT sector is seeing a boost along with the other sectors. Shares of telecommunications companies soared Monday as the broader market rallied. The telecom sector looked especially strong with experts predicting riskier companies like Sprint Nextel Corp., Qwest Communications International Inc. and Clearwire to outperform the market.

"Riskier [telecom] names have gotten beaten down more so than most of the other telecom names over the last several months," said Stifel Nicolaus analyst Christopher King in an interview with the Associated Press. "Today, people are presumably more comfortable with risk."

Movement on Wall Street this week has some optimistic after recent evidence of tightening IT budgets and layoffs at major technology companies cast doubt on the sector's resilience through a recession. The CIO Executive Board shows that more than half of CIOs have put nonessential projects on hold, and 61 percent are re-evaluating their 2009 budgets. Rumors are swirling that even Google may be preparing to lay off thousands of workers.

IT spending will drop next year as a direct result of the global economy, according to analyst firm IDC. The company slashed growth projections to less than half of its earlier predictions. Almost instantaneously, chip giant Intel Corp cut its fourth-quarter sales projection. Following this prognosis from IDC in mid-November, shares of computer makers Dell and Hewlett-Packard dropped.

In all, there's very little comfort in the recent success of the stock market, and particularly the IT sector. The economic situation is still largely uncertain.

For more on technology stocks read these articles from FierceCIO:

Some tips for IT to survive the current economic crunch

Paul Mah — Tue, 25 Nov 2008 05:11:04 -0500

As we wait for the worst of the fallout from the on-going credit crunch to pass, it has become inevitable that even the resilient IT industry will be affected by the economic climate.

I think it's safe to say that if the current situation had happened a short eight or 10 years ago, the inevitable outcome would be drastic cuts in IT department personnel (with IT-related spending put on an indefinite freeze). However, the inexorable advancement of technology is such that IT is now an inseparable part and parcel of normal operations. While IT can no longer be subjected to an outright amputation, it does make sense to attempt to reduce costs as well as increase its efficiency.

Here are some tips and resources to help you do just that:

A guide to cutting IT costs lists some tips where an organization can reduce running up IT costs.
Use this crisis to make things things ‘best-ever' highlights some ways which organization can leverage this downturn to make things better than they were.
Six ways to keep training staff talks about keeping up with IT training despite reduced budgets.
Consider switching to open source. Check out our short report on how 85 percent of companies are already using open source.
Consider switching over to a hosted e-mail service in order to reduce expenses.
If your company relies on high-performance desktops--animation comes to mind--you might want to check out top desktops for any budget for a good deal.

Report claims that Google is snipping 10,000 jobs

Paul Mah — Tue, 25 Nov 2008 04:57:04 -0500

Citing anonymous sources, WebGuild says Google may be preparing to lay off thousands of workers. These sources have also claimed that "hundreds" of staff have already been released over the last few months. Indeed, the only reason why this has gone unnoticed is the fact that Google has classified these workers as "temporary operational expenses," allowing the company to eliminate their positions without public notification.

A report at CNET appears to confirm it, although it pins the reduction in head count on a plan to reduce the number of contractors and not in reaction to the recent economic troubles. The reduction is achieved through vendor management, as well as converting contractors to regular employees, according to co-founder Sergey Brin.

Google spokeswoman Jane Penner, while short on actual details, told CNET that, "We have 10,000, and we have had a plan in place for awhile to significantly reduce that number. This is something we've been thinking about for awhile--six or seven months. It predates the most acute phase of the (present economic) crisis."

Layoffs are only to be expected in a slowing economic climate, though Google--the poster child of the "do no evil" camp--certainly gets more attention than most.

To read more about this story:
- check out this article from the Network World

Shift your priorities in this downturn

Judi Hasson — Sun, 16 Nov 2008 13:37:14 -0500

It's time to prepare three budget scenarios for next year, if you haven't already. As the economy seesaws, but continues to look grim, take a deep breath and try to look at the situation in a variety of ways. Develop a plan if your budget stays flat and another one that includes a 20 percent reduction in budget. And keep a third in your back pocket if the economic indicators become more favorable.

"In each case, we have said, 'This is what we deliver, this is what you would get for it, this is the consequence for stopping or reducing, and this is how much money you would save.' So, we're trying to be anticipatory with that," said Peter Whatnell, CIO of Sunoco Inc. in an interview with SearchCIO.com.

CIOs must do their part in helping to reduce costs. That includes cutting some projects, reducing service levels and increasing risk levels. Whatnell said that at Sunoco, he's reviewing everything from the level of services in the data center to the use of Google for email. Many companies, including Sunoco, are looking for quick solutions, Whatnell said. The bigger issue is convincing a company that they can benefit from efficient use of IT without just hacking the budget by 10 percent.

For more on your economic priorities:
- check out this SearchCIO.com article

IDC: Slower IT spending expected for next four years

Paul Mah — Fri, 14 Nov 2008 00:30:34 -0500

IT spending will drop next year as a direct result of global financial problems. This is the latest word from analyst firm IDC, who slashed growth projections to less than half of its earlier predictions. In a move that mirrored IDC's forecast, chip giant Intel Corp has also sharply cut its fourth-quarter sales projection in another indication of just how severely technology spending is being affected in the midst of the current economic turmoil.

Despite the negative news, IDC analyst John Gantz said in a statement that IT is still in a "better position than ever to resist the downward pull of a slowing economy." This optimistic sentiment is not shared by the stock market however, as shares of computer makers Dell and Hewlett-Packard dropped in the wake of the latest prognosis from IDC. Shares of HP fell $1.69, or 5.1 percent to $31.56, while shares of Dell fell 60 cents, or 5.2 percent, to $10.73. On the other hand, both Gartner and IDC are predicting a bright future for SaaS over the next several years.

For more on this story:
- check out this article from ComputerWorld
- check out this article from Forbes
- check out this article from CNNMoney.com

Is your IT budget flat yet?

Judi Hasson — Wed, 12 Nov 2008 14:59:24 -0500

Most people in the IT world already know that something is coming down the pike soon, and it's not good. SearchCIO reports that its "TechTarget's 2009 IT Priorities Survey" finds that the sky is not falling, but there is a cloud hanging over IT. IT shops will have fewer resources to support their projects, and people will be the first to go, the survey finds.

An estimated 37 percent of respondents to the survey said staff is the area most affected by the economy, more than twice the 17 percent who singled out hardware or the 15 percent who pointed to IT services. If there was no economic crisis, 64 percent said their budgets would be growing more. And nearly 70 percent said that if the economy does not improve in the first half of next year, there will be additional cuts. What will happen to IT budgets and investments in 2009 remains a big question mark. Many research analysts predict that total tech spending will be flat.

For more on the state of play:
- check out this SearchCIO.com article

Tips to help you survive a layoff

Judi Hasson — Tue, 11 Nov 2008 17:41:28 -0500

With times looking grim for the U.S. economy, it's important to keep your head up and plan for your next step in case you are laid off. This may be difficult because the fear of a layoff could be so paralyzing, it is difficult to find a new job. Richard Bayer, a former professor of economics and ethics who currently serves as COO of The Five O'Clock Club, a career coaching and outplacement network, says that you may end up better off than you were before you were laid off.

"Resist the urge to think of unemployment as the end of the world, no matter how upsetting it may be," he says. "Think of it instead as an opportunity to improve yourself and to make a fresh start. Maybe you're going to find out that what you enjoy doing and do well is different from what you were doing."

Bayer offers seven steps for keeping your boat afloat, among them:
> Negotiate the best possible severance package.
> Make job hunting your new job.
> Expand your search.
> Stop reading about the economy

For more on job search techniques:
- check out this CIO.com article

Forrester: What not to cut in this recession

Judi Hasson — Tue, 11 Nov 2008 16:11:23 -0500

George Colony, founder and chief executive of Forrester Research, said in a recent interview with the New York Times that the current tech sector downturn will be different than the 2001-2003 slide. This time, he said, there are plenty of tech tools that are embedded in the system. That includes broadband adoption, cell phones and electronic commerce.

"Your customers are connected to you this way," he said. "You can't stop technology spending, like you could the last time. You risk losing customers."

Forecasts for technology spending are meaningless these days, he said. No one knows yet when the economy will reach bottom, and until the market shows signs of stabilizing, industry forecasts are pretty much off the mark. But the Obama administration, he said, should be good news for the technology industry because it's younger and more tech-savvy than the Bush administration.

For more on forecasting tech:
- check out the New York Times article

Putting numbers behind IT budget woes

Judi Hasson — Sat, 01 Nov 2008 21:17:07 -0400

The economic news has been bad, very bad. Every week, there are articles predicting how the downturn will affect the IT industry, jobs and budgets. And as those in the industry know, IT is taking a hit. The latest projection comes from CIO.com which found, in an October survey of 243 technology leaders, that 40 percent of CIOs plan to cut their budgets from last year's level.

The first targets of the cuts will be contractors and discretionary technology projects. Seventy-two percent of IT leaders responding to the survey said they have postponed or will postpone discretionary projects. In addition, 46 percent of survey respondents are already letting open positions go unfilled.

"Until September, we thought the economy would recover in the back half of 2009. Now, not a prayer," says Rick Belmonte, CIO at Lowe Enterprises, a real estate development firm. Belmonte has deferred all new technology development projects until 2010.

For more on economic headaches:
- check out this CIO.com article

Is the tech sector in trouble?

Judi Hasson — Tue, 28 Oct 2008 21:42:03 -0400

So how bad is the current economic crisis for IT? Can IT weather the storm? Steve Minton, vice president of worldwide IT markets at IDC, says, "Companies are in the mindset of not spending in the next three months and increasing only 1 or 2 percent in the next 12 months. That's quite a change from last year when it was between 7 and 8 percent."

A report issued earlier this month by Gartner said that even though the bailout of banks spares IT from a worst-case scenario, they're still turning budgets downward as they head into 2009. Andrew Bartels, a principal analyst at Forrester Research, said, "We do see a slowdown," but he added that "We're not seeing a replay of the big tech bust of 2001-2002."

Basically, it's anyone's guess right now how bad it will be for IT. But the experts see startups being hurt by the credit crunch, projects put on hold, budgets cut and layoffs for tech workers.

For more on the current economic state:
- check out this InfoWorld.com article