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Issue Date: October 2001 (es)

The real world

1 October 2001

The IT sector continues to suffer a crisis of confidence, with red ink on income statements the order of the day, the 'bill-to-book' ratios of distribution companies looking tenuous, and no concrete evidence of the cyclical turn-around that most of us are looking for. IT budgets are still under pressure, with end-users reconsidering what they spend, where they spend it, and when to spend it.
Anything, any news that will give us some direction, is eagerly devoured.
Well, there are some interesting indicators which point to some positive news in the next six months. The first was an interview I had with Axel Hartstang, the president EMEA of Avnet, a global component distributor. Though last year saw a massive 30% to 35% drop in electronic component sales for the sector, primarily due to a the reduction in PC, telecomms and networking product sales, Hartstand suggests that things could be turning. Clearly before products are sold, they need to be built, and so advance component bookings give a clear indicator as to where demand is starting to pick up. Hartstang indicated that Asia's last few quarters had seen a turn-around in component orders, with the US indicating a similar trend, albeit somewhat lagging behind that of Asia. To offset this positive news, Europe has yet to bottom, probably due to the continued softness in the telecomms space.
A recent perusal of Dimension Data's Annual Report suggests that whilst the company is well placed to take advantage of a resumption in economic growth and technology spending, the outlook remains uncertain and technology spending is not expected to increase substantially this year.
In his chairman's statement, Jeremy Ord writes that, while world events last year touched many sectors, with the information technology (IT) sector being one of the worst hit, "the broader IT industry is in a cyclical downturn. However, IT is by no means a mature industry. The Internet is here to stay and will be integrated with all other communication channels required by businesses to transact with their customers. The e-business enablement market to which Dimension Data is exposed is expected to grow well in excess of gross domestic product in the foreseeable future."
Ord said IT investment was the cornerstone of any organisation's strategic development process. "This is why Dimension Data has positioned itself as a provider of solutions, as opposed to point technology or global service offerings."
And finally, at its latest Intel Developer Forum, Intel CEO Craig Barrett said that the world's economies are increasingly driven by technology, and that technology investment and R&D; are key to prosperity and economic development. Despite the current economic slowdown, the build-out of the Internet and the drive to create knowledge-based economies will continue to foster economic growth worldwide.
"For the industrial world, technology is what will lead us to new growth and economic recovery. The trend toward increasing reliance on technology for economic growth will only continue in the future," said Barrett. "As developing nations strive to build knowledge-based economies, technology is driving prosperity and productivity. "Silicon technology and the integration of digital computing and communications are at the heart of underlying technology advancement and progress."
From a business perspective, technology is as important as it has ever been. Strategically, probably more so. Whilst times are tough now, businesses which tough it out now and position themselves well for the upturn, which will come, will prosper. It has always been this way. Do not write technology off as a business enabler. Embrace it and deploy it wisely.
Till next month,
Darren Smith

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