Strategy Session: Armchair Economics

My grandmother, a schoolteacher, used to say there were only two periods during the year when she got any "real" teaching done. One was between Labor Day and Thanksgiving, and the other was between New Year's and Easter. The rest of the school year was disrupted by holidays and the anticipation of summer. It seems that's true for enterprise IT too.

Many fiscal years start July 1, which is when IT learns what projects will be funded for the year. CIOs who've lived through a few "now-you-have-it-now-you-don't" budget cycles know it's best to start new projects just as soon as the money is available--accounting can't take back what you've already spent.

The vendors know this too, and begin their product rollouts in earnest about then. The scope and quantity of those rollouts is a good predictor of what vendors think about the state of the economy.

So far, what we've seen from the vendor community indicates a good bit of pessimism. There are lots of reasons for that. At a macro level, the bond market is looking for an economic downturn while the Fed faces upward wage pressures that it would like to quash through interest rate hikes--remember stagflation? It's also an election year and, unless Democrats can snatch defeat from the jaws of victory, there's likely to be a change of management for at least the lower house of Congress--and that means uncertainty. This, of course, business hates.So what's a well-intentioned IT planner to do? Charge full speed ahead with new initiatives, or look hard at the dismal economic outlook and hunker down? For healthy companies with the resources, I say charge ahead. Most of the uncertainty is short-term. Whatever happens with Congress, it'll have a lot less effect on the economy than most politicians and even most economists think. Wage pressures in this global economy won't last (much to the disappointment of my personal bottom line) and even if they do, the Fed's going to have to start paying attention to all those bond traders, who tend to be the realists (if somewhat shortsighted).

So while the impending uncertainty paralyzes your competition, prepare for a better 2008. That's right, you heard it here first--2007 will be an inflection point and technology-savvy companies that make their IT investments over the next 12 months will reap the rewards as the economy resumes its clip. Now all we have to do is convince the enterprise IT vendor community to do its part and increase its investment in product development.

Art Wittmann is editor in chief of Network Computing. Write to him at [email protected].