Global Study Reveals Companies Believe Recession Far From Over and Spending on IT Will Be Flat in 2010
Princeton, N.J. — April 19
In a recently released study, Ronin Corp. polled nearly 1,500 companies across 12 countries on how the recession is impacting their companies, and it reveals that there has been little change in sentiment in the past 12 months. Throughout the period, 87 percent of companies have been negatively impacted, with 48 percent being “strongly” or “extremely” negatively impacted.
The study has focused on the IT function in companies and shows that they too are as affected negatively by the economic climate as was the case during 2009. This has resulted in an expectation that external spending on computers, software and related services will be flat compared with 2009 (which was 5.3 percent lower than the 2008 levels).
Two other major themes emerged from the study.
The first relates to the way companies as a whole are reacting to the recession. The study shows that there is a significant bifurcation between companies that are taking short-term actions concentrating on cost cutting and leaving strategic aspects until they emerge from the recession (“short termers”), and companies that are taking advantage of the recession to rethink their business models and develop strategies that will allow them to emerge stronger (“strategics”). It is clear from the study that the “strategics” have embraced technology more and are implementing initiatives to expand the systems and infrastructure to help them emerge with competitive advantage over the “short termers.” They believe they will emerge stronger, whereas the “short termers” believe they will not.
The study also reveals that there will be a recessional realignment — behaviors post-recession will be different rather than reverting to the pre-recession approaches.
There are five major aspects of change — the first is the increased customer power that buyers have had during the recession, which seems unlikely to be relinquished in the slow emergence from the recession and afterward. Coupled with this is the belief that the “recession pricing” that many vendors adopted during the recession to make some (albeit lower) margins rather than none will be insisted on going forward. The third aspect is the insistence on flexibility and variability — fixed-cost structures are being replaced by variable-cost structures. The fourth, and related, change is the shortening of cycle times for planning, budgets and projects. The five-year plan is a thing of the past. The complex, integrated, five-year project with payback only after that time has given way to a series of short phases with interim payback as each phase is completed. And the final change will be increased risk avoidance, which will encourage companies to buy mainstream or advanced rather than “bleeding edge” technology.
Harry Bunn, president and CEO of Ronin, summed it up: “The recession is far from over in its impact on companies and IT worldwide and that as these companies emerge they will be behaving differently than in the pre-recession environment.”
Ronin conducted this fourth phase of the ongoing program in late February 2010. More than 6,300 surveys were completed over the four waves across 12 countries — the U.S., Canada, Mexico, Brazil, Germany, the U.K., France, Italy, Spain, China, Japan and Australia.