Financial crisis set to hit technology industry hard

Senior technology industry leaders have started to feel the strain of the economic crisis and do not see it improving in the near future, according to a new survey from international law firm DLA Piper.


Technology leaders are feeling the strain of the economic crisis and do not see it improving in the near future, according to a new survey from international law firm DLA Piper.

More than 75 percent of respondents have been adversely affected by the economic slowdown, found a survey of senior executives at a broad cross-section of technology and venture capital companies in the US. Only 21 percent have not yet seen an impact from the global crisis.

A decrease in customer spending is the greatest factor in the decline of revenue forecasts, an outcome that has been felt by 66% of respondents.

Vendors believe that the crisis will not fade away in the near future. More than half of respondents (55 percent) believe that the stagnant IPO market will not rebound until 2010 or later. Only two percent believe that the economy will improve in the latter part of 2008, whilst 83 percent believe that it will not be until the second half of 2009 or 2010 that the economy will rebound.

But the survey, distributed to senior executives via e-mail, offered some hope for the technology sector. 'Green' technology, cloud computing and software as a service (SaaS) where identified as areas of growth that could buck the downturn trend.

Green technology will gain in popularity as enterprises try to offset rising energy costs with energy efficient technology and government face political pressure to implement sustainable technology. The survey said clean technology "is the greatest opportunity in the industry for the next 12 months and likely for the next 12 years".

Similarly, one respondent said enterprises will turn to cloud computing and promote SaaS licence models to lower overall IT cost in a recession climate.

Sixty eight percent of respondents believed that the current crisis is not going to be as bad for technology as the dot com crash of 2000. The consensus was that whilst this economic slowdown is severe, it’s more of a ‘collateral impact’ than the kind of monumental direct shake-up that resulted from the dot com crash.

“In a clear sign of optimism over their medium and long term prospects, only a quarter of respondents indicated they are reducing their sales and marketing expenses, and even a smaller percentage of executives were planning on cutting their research and development expenses," said Peter Astiz, global co-head of the DLA Piper Technology Sector Practice. "This seems to indicate a belief that the impact on the technology sector will be more short term in nature and that companies plan to continue to strategically invest in their businesses.”

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