Sunday, 12 October 2008

Kinda scary!

(by Richard Holway) Being away from home at a time of global crisis is a bit unnerving. Modern technology ensures that I am just as well informed as I would be if in the UK. But, somehow, it doesn’t feel right.

Back on 25th Sept – just over two weeks ago - when I have gave my ICT Leaders Annual Presentation, I reminded the audience that I had been warning of an industry slowdown for nearly a year and that, for most of that time, the sector had been ‘Living in Denial’. I also said that, since their return from their August vacations, the mood had changed for both CIOs and the vendors. Most CEOs I met now accepted that it was going to affect their businesses too. My ‘slowdown’ – even the ‘no growth’ – scenario for 2009 was finally accepted.

But that was two weeks ago. I’ll be quite honest, I have never lived through such a scary two weeks in my life. A crisis of this magnitude has clearly NOT been factored into my forecasts. Until the crisis works its way out, it would be premature to issue forecast revisions. But, whatever happens, 2009 is going to be much, much tougher than anything our sector has ever gone through before. I remind readers that we have only ever had two years (2002 and 2003) of real recession in the SITS sector – the others were ‘merely’ growth slowdowns/zero growth. Even 2002/3 represented low single digit declines – but we all know how much even that hurt.

If we really are likely to see some of the worlds largest companies (eg the two largest US automobile manufacturers) collapsing, then the knock on effect on the SITS sector is going to catastrophic. Those companies in the sector with large debts to service and those with dodgy cashflows will be the most vulnerable. I am certain that many will fail or, at best, be rescued at fire sale prices.

Last week I warned that the storm that was forecast had arrived. But this is no normal storm. This is something altogether more cataclysmic.

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