Innovation May be the Big Loser in the Financial Meltdown

Carl Weinschenk

Yesterday, IT Business Edge blogger Ann All offered a sobering look at prospects for IT as the economy melts down. Ann concluded that hard times are ahead, and that it may not be a bad idea for IT folks to brush up on job-seeking strategies.

 

Ann isn't alone in wondering what the near-term future holds. mocoNews presents the cases for the views that the impact will be long-term and dire and, conversely, that it will be relatively contained. The side predicting longer-term problems say that the market has changed irrevocably and that money for start ups and expansions will disappear. Young businesses will not be able to go public or be acquired, since companies that in better times would be interested in buying them won't have access to capital.

 

Those who think that the impact will be less dramatic see the great demand from huge markets in China, India and elsewhere trumping the structural problems that now are apparent. The movement to undeveloped markets, however, will depress average revenue per user (ARPU).

 

The report refers to the Portio Research study reported upon in this CNET story. The research was conducted before the dramatic events of the past couple of weeks, but the mocoNews.com writer thinks that many of the fundamentals cited by Portio still are relevant. The numbers are the key: Portio predicts that the portion of people worldwide with handsets will increase from 50 percent to 80 percent between now and 2013. This means that 5.8 billion people will have cell phones.

 

The top three growth markets, the story says, are China, India and Brazil. The former two will contribute about 1 billion new users between 2007 and 2013, with Brazil adding 132 million new subscribers. The writer says that the Portio results track with findings by the International Telecommunication Union.


 

The impact certainly will be felt among vendors. The upshot of this Industry Standard feature is that the market crisis will rearrange the landscape within the financial services industry. Many familiar companies will be gone, radically changed or just hunkering down. This will reduce spending in that sector. It also has a broader impact: The sense is that the financial services sector played something of an incubator role for cutting edge technologies. This will cease. Analytics, for instance, will feel the pressure:

Fewer customers with cutting-edge needs, combined with slowing revenue, may have the long-term effect of stifling innovation.

The storage and SOA sector will be impacted, but have a long list of customers beyond the financial services industry, so they are in better shape. The cloud computing sector is more vulnerable, however. In general, the small and innovative firms will be the most at risk.

 

That's all on the macro level. This common sense story at IT World Canada deals with micro concerns such as the likelihood of IT projects being shelved. The writer essentially says that the impact probably won't be dramatic, but that the deck chairs certainly will be moved around.

 

The writer's point is that the last economic downturn made return on investment (ROI) and other finance-first considerations essential parts of any planning process. Thus, it is more likely that projects are well-justified. The focus will be on changes in priorities instead of downright cancellations. Planners, the blogger says, are likely to look carefully at virtualization and SOA projects. Vista upgrades are good candidates for the back shelf and cloud computing seems to be on the bubble. The blogger concludes that companies shouldn't shortchange security, analytics, master data management and business intelligence.



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