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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lee who wrote (39523)	3/10/2002 3:28:20 PM
From: pompsander	Read Replies (2) \| Respond to of 99280

Steve: Much of what you say rings true to me, but there is also a dynamic at work right now which can not and should not be ignored. I work in a mid-size company, about 500 employees in the service industry. We provide services to pension and health and welfare trust funds, some of which are very large (>20 billion dollars). In late October and early November we went through our annual budgeting exercise. Some of the decisions before us had to do with capital expenditure questions. Our firm's revenue stream has been flat for over eighteen months, as fee increases have been out of the question. The "mindset" of our customers would not allow for us to try to pass through our increasing costs. Business was slow.....and we were conserving by not filling job slots which opened, or by replacing equipment which we believed should be replaced or updated in order for us to operate as effectively as we might. (Three examples, we had put off an upgrade from Windows NT to 2000 twice. We had refurbished about thirty PCs, upgrading memory and peripherals, rather than buy new machines at what would have been only slightly more money....and 1/2 of what the original machines cost, and we had pushed off an upgrde of our server storage...even though storage is cheap, cheap, cheap.) It was possible to put off all these decisions for a period of time...but not forever. Our business needs to continue to innovate in order to maintain profit margins and meet customer and regulatory expectations for the work we do. Long story short, in October and November we pushed out again our spending decisions until signs of an economic recovery were clearer. Once it became evident that the then-promised turnaround of 2002 was happening (be in March, June or September), we would be able to make some strategic moves, because our client base would be doing the same (as would our competitors) and we would need to react. In fact, we would be expected to react. Last week we held meetings both with our largest clients and with the budget team. Based on the recent economic indicators, Greenspan's recent comments, the ISM service numbers (which are important to us) and quick checks in our supply chains....we approved the migration to Windows 2000, the purchase of 30 Dell desktops and commissined an updated study of system storage needs with the expectation we will spend money there in the third quarter of 2002. We also are looking at filling two or three open job slots. We are only one of hundreds of thousands of companies in similar situations. During all of 2001 it was "easy" to put off spending decisions in IS (and in other areas as well), but management knew the time would come when we would have to react. Others are watching us and will react to what we do. Our clients will be more "mentally prepared" to hear about these expenses and examine some form of fee adjustment based in part on future productivity gains. All of this is going on, I believe, across the Country right now in various forms. The mindset of "expansion" rather than contraction can become a self-fullfilling prophecy quite rapidly in the correct environment. I think that environment may be upon us, and absent an inflation shock of some type, I think this recovery will surprise in its speed and responsiveness to perceptions of better times. This will then feed on itself, pushing the economy further forward. JMHO. I have become a believer in the past three weeks. A month ago I would have said no way.