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Peter Sayer
Senior Editor

IDC: Economic recovery is what you make it

Sep 29, 20034 mins
Data CenterFinancial Services Industry

Economic recovery in the IT sector is in the eye of the beholder and, depending on what you’re looking for, it may already be here – or still a long way off, according to speakers at the 13th annual IDC European IT Forum in Paris.

Conference chairman Jeremy Paxman, a British TV journalist famous for his sarcastic put-downs of politicians, set the tone for the day, saying the events were once more like festivals, “but now they’re more like religious gatherings waiting for the second coming.”

Booms and busts are a recurring feature of the IT industry, and vendors and buyers have weathered the cycle many times before, said Patrick J. McGovern, founder and chairman of IDG the parent company of IDC and of IDG News Service. He predicted another boom to come between 2013 and 2015, which he called the bio-IT cycle; this will be driven by the euphoria of developing technology to prolong life. He offered one snippet of investment advice for this boom: “Sell by the end of 2014.”

Paxman introduced IDC’s chief research officer, John Gantz, as a “former submariner” and asked how the market looked through his periscope.

“At least this year, the periscope is finally out of the water,” Gantz said.

Worldwide IT spending growth slumped from 10.8% in 1999 to -4.1% last year,and “This year, if we are lucky, it will climb up to 1%,” he said.

Even if Gantz is right, that will not be enough to convince everyone the recovery is here, according to the next speaker, Lester Thurow, professor of management and economics at Massachusetts Institute of Technology’s Sloan School of Management.

Thurow offered two definitions of recovery, that of an economist, and that of a businessman.

By recovery, “An economist means a sustained rate of growth: 0.1% is OK as long as it is positive. I don’t think that a businessman sees any difference between +0.1 and -0.1. What a businessman means by a recovery is that you can make money through growth rather than downsizing,” he said.

For economists, the current economic environment is hardly a recession, while for businesspeople it’s the worst they’ve seen since the Great Depression of the 1930s. “The U.S. has lost 3 million jobs since (U.S. President George W.) Bush took office, it’s losing 100,000 jobs a month,” he said.

If the outlook sounds bleak for the U.S., it’s worse for Europe, Thurow said.

Referring to his 1992 book, “Head to Head: The Coming Economic Battle Among Japan, Europe, and America,” he said Europe had all the advantages, including the best-educated workforce.

“The question is, where did I go wrong? In 2002 Europe was the slowest-growing area of the world,” he said.

Since then, an inability to forecast and manage future growth has hampered Europe’s economic progress, he said.

He had few kind words for the politicians and administrators at the head of the European Union, saying that the Swedes were probably right to refuse entry into the European Monetary Union in their recent referendum.

“Who would want to join a club that was managed so badly?” he asked

Paul A. Strassmann of consulting company Strassmann, and also a columnist for Computerworld magazine, followed Thurow on the stage.

“The golden rule is, he who holds the gold, rules. The CIO doesn’t hold the gold,” he said.

What we are seeing is not a technology recession but one induced by chief financial officers, he said. If you want to end your recession and spend some money, he told CIOs in the audience, you have to act like a CFO. That includes demonstrating the cost savings or return that new investments will provide, he said.