Just about every channel executive in the industry today is pretty much wondering the same thing about 2008 as all the various prognostications continue to roll in. The problem facing everybody is that the economic predictions being made today are all over the map. We all know that the general macroeconomic climate continues to be uncertain. A mortgage crisis may be precipitating a general economic recession, which we may be seeing further evidence of because consumers this holiday season already pulled back on their spending.
And yet, we continue to see reports of predictions of relatively healthy spending on IT that appear to be bolstered by some sectors, such as oil and gas, that remain particularly strong. For example, a survey conducted by CIO Insight, a sister publication of Channel Insider, finds that about one-third of the nearly 250 surveyed IT executives say their companies will cut IT spending or lay off IT staff if economic growth slows to 2 percent or less or crude oil prices hit $100 a barrel.
But nearly half see the U.S. economy in 2008 growing either at the same rate or faster than in 2007, and 77 percent see their own company revenues expanding at the same rate or faster in the coming year than in 2007; a mere 5 percent predict they'll shrink. This would suggest that IT executives are cautiously optimistic but are nonetheless putting contingency plans in place.
Overall, industry analyst firms such as AMR Research and Forrester are predicting that IT spending in 2008 will increase somewhere in the neighborhood of 5 to 8 percent, which should serve to bolster the spirits of the average solution provider executive. And yet, we continue to see more pessimistic reports from companies such as CDW that suggest that IT executives have already begun to delay spending on projects, which is a trend that may continue well into the next year.
This of course leaves everybody in a state of mild panic because they are preparing for the worst while hoping for the best. Just to show how diverse the opinions in the channel are about the future of economy, the folks at Service Leadership are reporting that an ongoing survey of more than 1,000 solution provider executives that was completed last August showed that solution provider executives were expecting their first net decline in profitability in 2008 since the study was first launched in 2002.
That study stands in sharp contrast to a Channel Insider study conducted in November that showed that 39 percent of the solution providers surveyed expected higher profits in 2008, while 28 percent expected flat to lower profits. But oddly enough, among those reselling products, the expectations for higher profits increased to 47 percent of those surveyed.
The reason for all these varying outlooks in the channel probably has a lot more to do with what specific products the people being surveyed are actually reselling and the associated business models of those solution providers than any specific economic trend. For example, in the Service Leadership study, solution providers that provided managed services to their customers were a lot more bullish than those that primarily relied on profits from selling products. Similarly, the study also seems to suggest that companies that sell into the Global 2000 space may have a tougher time than companies focused on the more robust SMB (small and midsize business) customer.
At the end of the day all these surveys should be thought of as barometers that indicate what the future economic weather might be rather than absolute forecasts because business is, as is life itself, what you ultimately make of it.
Michael Vizard is editorial director of Ziff Davis Enterprise's Enterprise Technology group. He can be reached at michael.vizard@ziffdavisenterprise.com.
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