Recession, What Recession?

By Drew Robb (Send Email)
Posted Aug 29, 2008


Drew Robb
During the past six months, the business press seems to be intent on having a recession. A constant stream of "glass-is-half-empty" articles focus on every piece of bad news and attempt to extrapolate it into a disaster scenario. Yes, some banks messed up, and yes, gas is expensive. But why insist on calling it a recession?

Hard-Core Hardware: Why can't Bill Gates get a mortgage and you can't get a PO approved? Is the economy really that bad? Not if you're in IT -- maybe.

The computer analyst community has bought into this with gusto. Dire warnings about IT budgets and spending constraints are becoming more and more prevalent.

The question is: Is it really this bad? I don't think so. All we have is a pendulum swing from waste and extravagance a la banks giving big mortgages to just about everyone, to banks that would be unwilling to give even Bill Gates a mortgage for a one-bedroom condo.

So to balance things out a little, here is some good news.

A recent survey from Robert Half Technology (Menlo Park, Calif.) found that 77 percent of CIOs said it was equally or more challenging to find skilled IT candidates compared to 12 months ago. Of those who said it was more challenging, 52 percent said the primary reason is a shortage of qualified IT workers. So that means IT is very much in demand and appears to be a career path with a lot of staying power.

Storage firm EMC (Hopkinton, Mass.) has experienced 20 straight quarters of double-digit growth. It grew 18 percent last quarter and has enough cash around to put $1.5 billion a year into R&D courtesy of annual income in excess of $13 billion.

Tam Dell'Oro, an analyst at Dell'Oro Group (Redwood City, Calif.), discovered that while spending on lower-end networking switches and storage switches may be flat, spending on higher-end gear has spiked significantly.

How about on the server side? According to the previous server report by IDC, server sales were $13 billion for the first quarter of this year, up 3.5 percent. All of the top five server vendors, except Sun, were higher than last year. (Sun was down 1.8 percent.) At the time of this writing, IDC had just put out its second-quarter results: Factory revenue in the worldwide server market grew 6.4 percent to $13.9 billion, the ninth consecutive quarter of positive revenue growth and the highest second-quarter server revenue since 2000. Unit server shipments grew 11.1 percent. This time, it's Dell, IBM and HP up on last year. Sun is down 7.2 percent and Fujitsu 2 percent.

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Gartner's most recent survey shows similar trends: Worldwide server shipments grew 12 percent in the second quarter, while revenue grew almost 6 percent. Similar to IDC, Gartner has HP, Dell and IBM posting revenue growth. Dell, contrary to the perception that the company hasn't been doing well, has been tops the last two quarters. Fujitsu was down 0.1 percent, and Sun dropped 6.8 percent. If you look at server shipments, all server vendors are up.

The areas of obvious gloom are in transportation and housing. There are clear cut horror stories there. In IT, there really aren't that many casualties of late, so why complain? The main damage is in perception. CIOs are being told by their boards or CFOs to run a tighter ship, cut back, trim the budget and so on. So IT managers are going to have to cope with this for the time being. Hopefully, after the election, enough people will decide everything is wonderful again, and the perception will change.

But now is the time to get very nimble with ROI numbers that clearly show the IT organization is creating greater income for the company as well as saving the corporate coffers. Similarly, it might be wise to focus on projects that demonstrate an obvious return as opposed to long-term projects that are vital but much less tangible.

And remember the words of Dell'Oro: "Maybe it's really not as bad as everybody says."

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