Stock Market Correction’s Impact on IT Spending? Not Much…For Now

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

Monday's sell-off caused a panic. Tuesday's bounce back was met with cheers. We'll see where we end up today, but let's just say there's no shortage of mania in the market. The words "double-dip recession" are enough to send anyone running.

But, if there's any bright spot in this mess, it may be IT. In a recent article on eWeek.com, Wayne Rash cites Forrester Research's optimistic outlook for IT spending, despite current events. According to research analyst Andrew Bartel "the prediction for continued slow growth in the IT industry hasn't changed."

If you need proof, just take a look at the latest quarterly earnings from three of the industry's largest vendors. Microsoft posted record revenues (Q4) of $17.37B -- up 8%. Oracle's revenues (Q4) rose 13% to $10.8B. Behemoth IBM's revenues (Q2) are up 12% to $26.7B. eWeek.com's Rash elaborates:

"Bartels said that currently the tech sector is growing at about twice the rate of the U.S. GDP (Gross Domestic Product). Enterprises are investing in technology because that helps them become more efficient and, in turn, that helps raise profits, he said. Corporate profits in the U.S. on average are in the double digits, Bartels noted, and unless the U.S. slips back into a recession, he expects them to stay that way. He said there's a cycle at work, "Companies are using technology to improve profits and using profits to buy technology."

Bartels reference to "a cycle at work" is a good one -- a viciously good one, in fact. Increased technology investment will lead to more profits that will fuel job growth, which will lead to more market demand and so on. Long story short, there's a lot on the line when it comes to IT spending.

For that reason, companies have good motivation to improve the way they manage vendor costs and contracts. It's not about saving a little here and there -- it's about fueling business growth in unpredictable times.

The teams at both NPI and SpendMatters want to know -- given current economic conditions, will you be changing the way you manage vendor cost and contracts?

-- Jeff Muscarella, EVP of IT, NPI

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