Sunday, 9 March 2008

How the UK SITS sector has behaved in previous recessions

There are probably quite a few HotViews readers who have never been through a recession before. The last one was in 1991 – 17 years ago. So, to be practical, unless you have 25 years IT experience under your belt and are approaching your 50th birthday, you really don’t know what is going to hit you. As you can see from the chart below, UK SITS growth came to a crashing halt in 1991. Indeed, the downturn felt much worse because the 1980s had been non-stop double-digit growth. Huge numbers of IT staff lost their jobs in the downturn. It should also be noted that the recession was presaged by a massive downturn in property prices causing the term ‘negative equity’ to be invented! Quite a few of my friends lost both their jobs/companies and their houses (which had been used as security against company debts) The bad times lasted from 1989 to 1993 – ie it took getting on for four years for the good times to return. The internet/ fuelled boom in the later part of the 1990s is well recorded. The post 2000 downturn was NOT caused by recession – far from it.

The chart also shows that there were two other recessions before 1991 - in 1974/75 and 1980/81. In 1974/75, SITS suffered along with the rest of the economy. But in 1980/81, SITS was totally unaffected. This is where ‘Next Big Things’ in technology – the IBM PC was launched in 1981 – meant that the sector bucked the trend. This is always used as the ‘evidence’ that we, in IT, should ignore history. A very short-sighted and dangerous viewpoint!

It would, of course, be good to think that a ‘Next Big Thing’ would ride to the rescue again. Indeed, in certain sectors it will. But this is an age when Disruptive Technologies rule – so some will do very well at the expense of a rather larger number that won’t. In the past, companies thought the way forward was to spend more on tech - now they think it's to spend less. This time, the totally of SITS spend is just bound to be adversely affected along with the economy.

I’ve already said that I believe UK SITS growth is more likely to be zero in real terms (c3% at the headline level) in 2008. I’d now add a prediction that UK SITS growth in 2009 will be negative in real terms.

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