The IT Economy Is Looking Up, or Maybe Not

Arthur Cole

There's a classic Bloom County cartoon in which Opus is trapped in Binkley's Anxiety Closet with a pair of economists. In the span of four panels, each economist argues that a) the economy is getting better; b) the economy is getting worse; and c) the other economist is a horse's patooty.

And even though that strip is at least 20 years old by now, it's still amazing how little things have changed.

It came to mind this week after reading the latest Gartner report on the state of the IT industry. The headlines certainly sounded encouraging, with the group predicting a 5.3 percent gain in global spending for 2010. Earlier this month, Forrester signaled even greater optimism, with analyst Andrew Bartels pegging the 2010 gain at 7.7 percent.

Either number would be an impressive feat in any cycle, but coming off of the past two dismal years, they are downright miraculous. So the IT economy is getting better.

But hold on. A closer look at those reports reveals that a good chunk of the gain is attributable not to increased deployments but to the declining value of the dollar. In Gartner's case, the impact of currency fluctuations accounts for nearly 80 percent of the gains, leaving the actual increase for 2010 at a mere 1.6 percent. So the IT economy may not be getting worse, but it's not expanding as much as the headlines claim.

Regardless of the actual cause of the turnaround, the numbers are undoubtedly leading to high-fives in the boardrooms of corporations like Intel. The company reported a whopping $2.4 billion first quarter net income this week, nearly three times the performance of the same period a year ago. While exchange rates probably helped, it's hard to overlook the role that the new Core and Xeon chips will continue to play as the enterprise industry shakes off the doldrums. Then again, as's Erik Sherman points out, a closer look at those numbers reveals that the PC Client group was flat and Data Center revenue dropped 8 percent.

But that's economics in a nutshell. Conditions could be getting better, but maybe not. The economy will rebound, unless it doesn't. There's always something to be afraid of, but for the moment we should ride the wave.

And if you don't agree, you're a horse's patooty.

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