CXO

Are IT consultants a barometer of IT spending?

We all want to forecast the future, especially when an economic upturn could prove a saving grace. Some have suggested that increased consulting budgets could predict a recovery. Join the discussion and tell us what you see in your crystal ball.


The players on Wall Street collect economic indicators like gamblers collect good-luck charms. Some look to obscure government reports, while others may even consider some strange, seemingly unrelated signs—like the sales of lipstick.

The theory goes like this: When times are tough, women who want to buy a luxury item will opt for something that’s not too expensive. Supposedly, the sale of lipstick has increased every time the economy begins to sour. What's good news for Max Factor foretells a bumpy ride for the rest of us.

No, I don’t have the sales figures from Revlon to back up this theory, and luckily, that’s not the point here. My question is: What is the best bellwether that IT leaders can look for that would indicate a recovery in IT spending?

IT consultants often complained that they were the first to have their business decline when markets were shaky. Is it possible that consulting services would be among the first to see spending as confidence returns among business leaders? Or, would another segment of the IT industry see the first signs of increased spending? Perhaps PC sales or an increase in help-desk services means we’re heading toward an upswing.

Join the discussion and tell us when you think consulting services will see positive signs of growth. Have you already begun planning to contact former clients?

Reading the tea leaves in IT
On December 5, 2001, the Dow Jones Industrial Average rose 2.2 percent, to climb well above 10,000 for the first time since early September, with the NASDAQ rising a dramatic 4.25 percent, to close above 2,000 for the first time since early August.

We know that the markets will see gains and losses in the weeks and months following the terrorist attacks on the United States. But at least the landmark 10,000 has been reached—bolstering hopes that even if a recovery isn’t already here, at least we may have seen the bottom.

But, IT consulting firm Gartner isn’t so bullish about the speed of IT’s return to spending. The Stamford, CT-based company predicts single-digit growth in IT spending throughout 2002, with IT spending not bouncing back until 2003. Analyst Kathryn Hale outlined Gartner’s view in the report "Gartner forecasts a rebound in IT service spending from 2003-2005." Hale wrote, "Decision makers are still digesting the effects of a declining economy and the war against terrorism. So far, they prefer to avoid risks and delay investment decisions."

She advised that IT service vendors rely on what she termed "life preserver" services, such as:
  • Payment processing.
  • Applications and data-center outsourcing.
  • Product support services.
  • Security and disaster recovery.

Are consultants a barometer only at the start of an economic slide?
Many IT consultants complain that they are the first budget item on the chopping block at the first sign of economic trouble. So, with this in mind, would IT consultants then be among the first to benefit from renewed confidence? Post a comment and join the discussion.

 

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