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Living with the new economy

Confidence in the technology sector is pretty low. Some blame the dot com failure whilst others look back to September 11 and the fear of a long-term war on terrorism. The fact is that the IT industry has been given a sharp reality check.


Market Analysis

Living with the new economy
Confidence in the technology sector is pretty low. Some blame the dot com failure whilst others look back to September 11 and the fear of a long-term war on terrorism. The fact is that the IT industry has been given a sharp reality check and now the big question is whether things will ever go back to where they were or whether this is the new economy and we all have to learn to live within it.

One thing that we have seen is various analysts and market experts squirming as they try to predict when we will finally see some kind of upturn in fortunes. There was massive optimism back at the beginning of 2002 as everybody seemed to start the new year with increased determination (and new budgets). However, by Q2 everything was back to its previous sluggish ways and nothing has changed much since.

When things were looking up early in 2002, the accepted wisdom was that everything would start to look rosy again by the Autumn of 2002 or early 2003 at the latest. So shouldn't we be seeing some improvement? Some will say that we are, but the majority are seeing no change.

For example, the latest ACNielsen Internet Confidence Index shows an 8 point rise over the same time last year although it is still below the level at the end of 2001. Much of this improvement seems to have been fuelled by the growing availability of broadband which is giving consumers an enhanced experience. This is reflected also in the expectation that online spending for the holiday season will rise by more than 20 percent over last year. This is an indicator that a properly constructed online business can succeed and that, despite the dot com bubble burst, e-commerce is alive and well.

The ACNielsen survey is based upon 1000 consumers of Internet facilities. Others seem to come up with estimates based upon wet fingers waved in the wind. For example, Gartner is now predicting a 3.4 percent increase in IT spend from 2001 to 2002 but also states that we can not expect to see any change in the overall fortunes of the market at least until mid 2003. There is no indication of how it has arrived at this analysis or why its earlier predictions of a market improvement in late 2002 are not coming true.

The reality is that nobody really knows what is going to happen to the IT market. Budget is available for key projects or where value can be realized very rapidly. Strangely enough, the days where businesses would buy technology for the sake of being the most up to date are long gone. IT is no longer the easy sale that it used to be. Perhaps it's time to stop predicting when the good old days will return and time to get on with life in the real economy.


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