IT survives US economic downturn, for now

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IT survives US economic downturn, for now

Latest figures shows that the IT industry has been surprisingly immune to the US economic slowdown. But analysts warn that this immunity won’t last.

Andrew Bartels, a vice president at Forresters Research, said that growth in the US tech market was 'surprisingly strong'.

“During Q2 2008, the US economy grew by 3.3 per cent, while business investment in IT equipment and software rose by 11 per cent.”

According to data from the US Labor Department, payrolls of computer and electronics manufacturers grew 5.1 per cent from July to August. There was a 6.3 per cent increase in the work forces of computer-systems designers and related service providers.

Vendors experienced a slower revenue rise of four per cent.

Bartels warned that the industry insulation probably won’t last. He predicted that fourth quarter growth in technology goods and services would slow during Q4 2008 all the way through the first half of 2009.

“Computer equipment will bear the brunt of the slowdown in 2008, but network equipment and software purchases, while still growing, will see slower growth in 2009.

“And IT services purchases, which so far have defied the gravity of slow growth, will start to see little or no growth.”

Bartels said that while he wouldn't rule out rounds of layoffs in the tech sector, he also "wouldn't expect to see big ones."

In general, technology companies are experiencing a slowing of growth, but not an overall decline in business. In such a case, Bartels said, one of the things companies try to protect is their staff. Before they will cut payrolls, they'll cut contractors and equipment, for example.

"They know [their staff] is a valuable asset," he said.

In Australia, some technology and services companies have already experienced staff cuts. Telstra recently cut 800 employees from its Bigpond service and 100 from its subsidiary KAZ.

HP’s recent cut of 24,600 staff worldwide did not affect Australian employees, according to an HP spokesperson.
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