In theory, IT should be counter-cyclical to some extent and it certainly used to be, in the 1980s and 1990s. The dot com recession could be treated as an exception, because it was so IT focused. But things have changes. Nowadays, a good deal of IT is in the consumer market (PCs, mobile phones, etc.) So the recession was bound to smack IT upside the head – and IT consumer products are suffering accordingly.
The Corporate IT Picture
Estimates (from Gartner et al) about 2009 IT budgets suggest that they will be flat to negative (possibly as bad as 5% down.) This doesn’t sound so bad until you realize that about 80% of corporate budgets are spent on keeping everything going from an operational and maintenance perspective. A reduction of 5% could be a reduction of 25% in corporate spend on hardware, software and external consultancy. However it’s a mixed picture. One clear effect that is already evident is that the spending on PCs and servers has fallen precipitously and that on its own could account for a 5% drop in spending.
The reality though is that it’s a mixed market: some IT have budgets have been reined in, while others have been decimated. It’s also worth bearing in mind that IT spend is a lead indicator of economic recovery. Companies begin to invest in IT as they start to get confident that the storm has passed, in the hope that they’ll come flying out of the recession like a bat out of hell.
So the question arises: what are the information technologies that will do well this year? Here’s a list ten that seem to be reasonably recession proof:
- Server Virtualization. This is a quick win if you’ve not already virtualized everything in the data center that’s got an ounce it silicon in it. Estimates suggest that less than 20 percent of the server population out there has been consolidated. Couple that with the fact that virtualization reduces a server population by about 25 percent and you have a win-win-win scenario. You cut costs, stop the data center from overflowing and feel greener than a ripe cucumber. Previously you might have thought of selling the old servers on eBay, but now you can just keep them and gradually deploy more apps on them.
- Client Virtualization. What’s sauce for the server is sauce for the client. Pushing desktop PCs into the data center in some way (think Citrix, VMware, PC blades, etc.) and replacing them with thin clients will usually cut costs. Note that it is a more arduous project than server virtualization – plus you may have to deal with the specter of users holding tightly onto their PCs every time you walk by. (Hint: Deploy thin clients at night.) Client virtualization cuts administration costs and, in the longer term, PC procurement costs.
- Data Storage. The recession may reduce the number of people who work for an organizations and it may reduce the number of transactions that an organization executes, and it may reduce revenues, but it wont reduce the amount of dat that has to be stored. That’s just the way it is, so get used to it. At least some of the data storgae vendors are going to have a reasonable time in the recession.
- Data Mining. Just as they don’t stop gathering the data in a recession they dont stop mining it. To be more precise, the indications are that the VLDB vendors (Green Plum, Vertica, Sybase et al) are having a reasonably good time despite the crumbling economy. This has a lot to do with delivering value – there’s gold in “them thar data heaps.”
- PPM. By which I mean Project Portfolio Management. I just blogged about CA’s Clarity yesterday, but I happen to know that it’s not just Clarity that’s on a good growth curve. Other PPM vendors are doing well, epecially where they have a SaaS offering.
- Open Source. Corporate IT Departments stopped being leary of Open Source quite a while ago, but they didn’t immediately embark on a crusade to slice up software licensing fees. There are many opportunities in many places to cut license costs with Open Source products used sensibly. Also a great deal of time can be saved. Some products like Hibernate for example are used with only a few people realizing that they are open source products. For web development there’s a plethora of open source products such as Joomla, Drupal and WordPress (if you want to build a web site or a blog). Do they really cost nothing? Yes they do. Are they really good? Yes they are. Are they still improving? Some of them certainly are. Nowadays organizations ought to have a strategy for using open source rather than simply using an open source product here and there.
- SaaS. Software as a Service gets more mature every year. It’s inexpensive to implement and easy to trial. The portfolio of Salesforce.com, the leader in the field, is increasing and it is now surrounded by a partner ecosystem. There’s also Oracle On-line and NetSuite. Other SaaS startup companies, such as LucidEra (for BI) or Workday (for some ERP functions) seem to be making an impression.
- SaaFS. Software as a Free Service could be even more compelling than SaaS. Now is definitely the time to examine the feasibility of web “office applications”, either from Google or Zoho. They are increasing in sophistication by the month and for some users they are “good enough already”. Actually there are also advantages to them because the data is held on the server. It allows them to provide an excellent versioning service. Using email as a free service also makes sense for small companies.
- Cloud Computing. The gradual drift towards cloud computing (or utility computing) has turned into a flood. Amazon lit the way with EC2 although both EMC’s Mozy or LiveVault for back-up were around ealier. Infrastructure as a Service is a particularly attractive idea for organizations that rae running out of data center space and the major vendors (IBM & HP) seem to be laying down strategies to fuel this market right now. There’s also Platform as a Service vendors such as Google App Engine, Bungee, Force.com et al that are worth investigating.
- Mashups. The joy of mashups comes from opening up your APIs to a developer community and having them develop complementary capability that enhances your own systems/web sites. The neat thing about mashups is that they don’t cost you anything other than the effort to provide a little support to the developer community and enable them to profit in some way if their mashups get used. It’s a kind of free market in software components which can serve a company well if it knows how to manage it cheaply.
I have a sneaking suspicion that when the IT industry emerges from the downturn, in a year or so it will be a different industry than the one that went into it.