Every quarter since 2001, ChangeWave Research has asked about 2,000 businesses about their tech-spending plans. The survey released Friday, which was conducted in early November, found that 45% of businesses say they’ll decrease tech spending—or spend nothing at all—next quarter. That’s up from 29% who said they would decrease spending last quarter. It’s also a new record for the survey, topping the 37% who said they would decrease spending in September 2001. Just 10% of businesses said that they would increase tech spending next quarter, a record low for the survey.
More bad news: Thirty-nine percent of businesses say they’ve spent less than they originally planned so far this quarter. And 48% say they don’t think tech spending will begin to pick up again until after the third quarter of 2009.
The number of job cuts in the tech sector this year already surpasses the total for all of 2007 and 2006, according to Challenger, Gray & Christmas. Projected over the full year, cuts are on pace to reach their highest level since 2003. (One silver lining: We aren’t close to approaching 2001 levels, when the tech sector shed 695,581 jobs.)
But wait, there’s more. Two-thirds of job cuts—about 89,000—have taken place since July. So the trend isn’t good. And there are plenty of signs that the economic slump is just starting to hit the tech sector in earnest. Intel, for example, cut its revenue forecast for the current quarter by about 10% this week.
Microsoft Thursday said that new customers for its Dynamics customer management and accounting software can qualify for 0% financing. The announcement follows a similar one in late October from SAP, which offered 0% financing to qualified small and medium-size businesses that buy its software.
If free money in the middle of a credit crisis sounds too good to be true, that’s because it probably is. Only qualified customers will get 0% financing and, as a Microsoft spokeswoman tells us, “the guidelines are pretty stringent.” In other words, this is just a hook to get people to consider buying software at a time when they might otherwise delay purchases. Coincidentally (or not), Microsoft’s Dynamics group is holding a big conference next week.
International Business Machines chairman and chief executive Samuel J. Palmisano, making a rare public appearance, said that he anticipates the current financial crisis will be “a short term issue.” He declined to say how short.
The first time ever the Indian IT industry tasted a downturn was in 2001. That is when 9/11 sealed the doubt over whether the dot.com and telecom busts as well as a recession were all real. At that time, at MindTree, we were a less than 500 people. We did two things immediately: the internal board took a 25% salary cut and everyone else took a 10% cut. Those steps were not enough. So, we seriously considered asking the “bottom 5%”, formally assessed as “non-performers”, to be let go. That was when we had a lesson in people caring. The middle-management team walked in to Chairman Ashok Soota’s room and said they were willing to volunteer an additional 2.5% reduction in salary so that the bottom 5% could be retained until the market rebounded. Their logic was simple: do not let go of poor performers at a time when jobs are difficult to come by in any case. We listened to them and we all survived.