What happened whilst I was away?

(by Richard Holway) I don’t know, I leave the country for three weeks and this is what you do in my absence! My bankers have been nationalised. My local council is going to have to cut services because they put 'our' money in an Icelandic bank. FTSE100 down 17% and FTSE SCS down even more at 20%. When I left Gordon was down and, most probably, out. Now he’s the Savour of the Universe.

The greatest difference I sense is in confidence. As I said at my Prince's Trust ICT Leaders Dinner on 25th Sept, our industry had been ‘Living in Denial’ for most of 2008. In Sept, they had grudgingly accepted that, perhaps, growth might be about to slow. The sense I get now is that pretty much everyone accepts that 2009 is going to be very bad. Jobs are just melting away – in our IT industry just as in the economy at large. New projects are on hold at best – cancelled at worse. IT startups, which managed to raise funds in the better days, are now having to preserve their cash (and therefore not spend on IT) as they know they won’t get anymore. (See Businessweek 12th Oct 08 - Startups starved of cash)

Indeed, I note the FT today (19th Oct 08) carries a deeply gloomy report - Job losses spread in Silicon Valley - about the job cuts being made in tech start ups - in particular Web 2.0 - companies in California. "I think the situation is very, very serious. From my network of entrepreneur friends, half are in a critical situation for the next 6 - 12 months" said one CEO. "We need to clamp down and weather whatever storm is about to hit us" said another - in words very similar to ones I have used on many occasions on UKHotViews in recent months.

Let me quote from an email I received on my return from a UKHotViews CEO reader:

“I would say that there is virtually no sense of "denial" anymore, rather a sense of impending doom! I have not met any business leaders in the past few weeks, in any sector, who have NOT said that they expect to cut people, save cash, defer decisions etc. I think that anyone in the Corporate Finance/Professional Services space that doesn't have a restructuring/insolvency capability is facing the worst year in living memory. I can identify a string of lawyers/accountants who are already freezing recruitment and laying people off.............and it’s hardly started.

Personally I believe that everything indicates that we will have a worse recession than 1990-93. That means we'll see GDP contraction of up to 6% in real terms spread across a year. I think this Q and next will be very severe, and I also think unemployment will rocket to over 3 million. If anything, I'd say the Tech sector is probably in better shape than others, but only because it had the toughening up experience of 2001-3”.

I wouldn’t disagree with any of those points. If we do indeed get “GDP contraction of up to 6%” in the next year AND if you subscribe to my long stated “IT will track 1xGDP” thesis (been pretty accurate, if not a little optimist, in the first 8 years if this decade) then IT is just bound to be in for the toughest time ever in the whole of the 40 years I have been tracking it.