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Will there be a tech downturn in the IoM?
THE media is still full of doom and gloom about the global banking and finance industry, with daily stories about valuations being cut and massive redundancies being imminent.
We like to think that the Isle of Man will not take a hit, but it would be naive to assume that world events cannot touch us.
As reliant as we are on the financial sector, the negativity is bound to hit every aspect of the economy — especially those industries that support banking, such as information technology.
Financial organisations are being forced to redraft their investment plans to cut costs and it is usual practice for the first item on the hit list, after a reduction in workforce, is the IT budget.
A study in February and March has been released by the CBI and PricewaterhouseCoopers showing that almost half of the 79 organisations questioned said volumes had decreased. Nineteen per cent said profitability was at its weakest since March 2003 and 25 per cent had cut jobs during the past three months.
CBI chief economics adviser Ian McCafferty said: 'We can expect further tough times in the financial sector and, as this feeds through into the wider economy, it will inevitably be felt through slower growth this year and next.'
Banking and securities organisations said IT spending will fall.
However, building societies and general insurance companies have recently seen business gains and expect to invest more in IT in reaction to regulatory changes and multichannel expansion. But both markets will begin to see a downturn in three to six months.
PricewaterhouseCoopers' UK banking advisory leader Andrew Gray said: 'Despite market conditions, and a mortgage demand slowdown, building societies remain quietly confident in their ability to fund and manage their business. Although activity is expected to slow, and the availability of funding to limit new business growth, the sector's improved settlement is reflected in the strength of IT and staffing plans.'
But technology industry analysts are forecasting a slowdown in IT spending for 2008. IDC and Forrester Research are in agreement. IDC says the global IT market will grow by US $1.38 trillion, down from 6 per cent in 2007 to 5 per cent in 2008, while Forrester indicates that the IT market will expand by only 6 per cent, instead of the 9 per cent it had originally projected.
Gartner Research is advising IT directors to hedge their bets by drawing up two separate budgets for 2008. The company says the first should be a business-as-usual budget, based on guidance provided by senior decision makers, while the second should be a back-up budget based on the need to cut costs if necessary.
But, on the whole, the technology industry remains optimistic despite all the warnings. A report from the National Computing Centre (NCC) says that more than half the 120 senior IT decision makers polled said they expected IT spending to continue increasing, despite current economic uncertainty.
NCC managing director Stefan Foster said: 'We hear talk of a recession, but the benchmark results indicate that IT purchasers are remaining confident about future economic conditions. They are making sure that their businesses have the right technology to deliver growth of the coming years.'
The study suggested virtualisation, automation technologies, customer relationship management and enterprise resource planning will continue to receive strong investment, largely based on their ability to cut operational costs.
But while the numbers of firms investing more heavily in IT will rise, the NCC report notes that total IT spending in the UK is likely to drop in 2008. This discrepancy is explained by a decrease in the number of financial services companies participating in the survey.
So is it time for optimism or realism in the Isle of Man? The Treasury Minister seems to think there is room for both. In his recent budget speech he said: 'While there is little evidence of problematic liabilities within the IoM banking system, there is reason for caution in projecting the economic outlook arising from the credit shortage and the related impact on business confidence.
'The full impact may not be felt for some time yet, but we can take some comfort from how the Manx economy is continuing to grow.'
>>Sherrilynne Starkie is the managing partner of Strive Public Relations, a communications consultancy serving the Isle of Man. She provides her views on business and technology each week in Tech Talk. Visit her business blog Strive Notes for frequent updates.
www.strivepr.com
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Weather for Isle of Man
Saturday 04 February 2012
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