What Will Be the Drivers For the Next Phase?
Rich, I am cautious and expect overall spending on
IT to actually fall over the near term when all is said
and done 6-12 months from now when we look back,
IMHO. Make no mistake - I love technology & innovation
and hope I'm wrong, but to play the devil's advocate
consider these arguments:
The great drivers for technology spending 1998-2000
were the Y2K fears, and the Internet Dot.com spending,
The Y2K phenomenon forced corporations, financial
and government institutions to upgrade/replace much of
their hardware/software systems to be in compliance.
This was not an option.
Fears that the internet startups would eat their lunch
forced IT spending by more established corporations.
Either get onboard with the internet and doing business
over it, or get left behind. If you got left behind this new
medium, you weren't going to survive was the message.
So spending on IT was not considered an option.
Two other main drivers behind technology spending was
the Federal government push to wire up the schools and
libraries of the nation to the Internet. To maintain
our competitiveness as a nation, this was not considered
an option. and Two: the huge investment in building up
the telecommunications infrastructure that would support
all the new Internet applications and high-speed broadband
access from the home. If we didn't want the Internet to
come to a crashing halt due to network bottlenecks, we
had to build a lot more telecomm capacity. At the time,
this was not seen as an option either.
So…Y2K has come and gone.
Schools and Libraries are pretty much wired.
Internet Dot.Coms have gone bust all over. Venture
capitalists and shareholders are licking their wounds.
Funding for startups has dramatically fallen as investors
are much more cautious about taking risks with new companies.
Telecomm companies that rose up to challenge the RBOCs
are in the process of going bust all over. No one knows
how much of the $800 billion in junk bonds tied to the
telecomm buildup ends up defaulting. The Bellheads/RBOCs
won, the Netheads lost. Northpoint, Rhythm Connection, ICG,
GST, PSInet, Winstar, all in bankruptcy with certainly more
to follow. The long distance companies: ATT, MCI-Worldcom
both on the ropes as long distance pricing has collapsed.
It's apparent now that the traffic isn't there to support
the huge network buildouts that took place over the last
several years…at least to generate the cash flow needed to
service the huge pile of debt that was incurred.
And this is the base (busted internet & telecomm companies)
from which the next spurt of technology spending will
spring from?
So I would humbly ask - what are the forces out there, the
competitive reasons that will compel businesses to invest
in technology at the same heightened rates such as occurred
over the last several years?
Peter. |
