Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.
CARY, N.C. – A packed ballroom of technology executives from across North Carolina breathed a collective sigh of relief Friday as a top tech analyst at the delivered a semi-positive view about the global economy and information technology spending in 2010.
The recovery from one of the world’s worst recessions since the Great one is at hand, Michael Smith told the annual meeting. Unfortunately, the rebound is not what everyone had hoped it will be.
“It’s a lower-case v recovery,” Smith said. “It’s a recovery, nevertheless.”
Most of the executives listened attentively to Smith’s spend analysis – and also another key message he delivered.
Don’t skimp on IT investments if you want to remain competitive, he warned.
Citing a recent MIT study about IT and its impact on productivity, Smith stressed that information technology “will remain a competitive differentiator.”
Gartner is among the firms forecasting growth in tech spend this coming year, but at best the increasing will only make up for the decline that helped drive companies like Nortel into bankruptcy in 2009.
One strong positive sign that Smith relayed to the tech execs was a strong 8.1 percent “spike” in productivity in the third quarter of last year.
“Labor is a lagging indicator of economic recovery,” Smith said, noting the continuing increase in unemployment. “A spike indicates a return to hiring?”
Why? Because firms are running their remaining work forces at “red line” speed, he said. Employees are being “stretched out” as inventories are rebuilt and preparations for growth are put in place.
However, Smith noted, hiring must resume at some point. Just like with engines, he explained, “you can [red line] for only a while” before something breaks.
“IT Will Remain a Competitive Differentiator”
The study to which Smith referred to found that 80 percent of productivity between 2000 and 2007 can be linked directly to IT and applications.
There’s a crucial caveat to the spending, he added. IT improvements require more than just software, hardware and dollars. Companies must “learn how to use technology better,” Smith explained.
“IT is correlated with productivity but there are substantial variations among companies,” he added.
The firms that succeed best not only spend but also are agile and are seeking disruptive technologies in their fields – or using technology to give them a disruptive advantage over competitors.
One example of a technology that requires companies to be agile in its use is the red-hot rage known as “cloud computing.” Smith stressed that collaborative computing offers many advantages from ability to scale on demand for PC and server power to bandwidth. But what companies will use it best? And which service providers offer the most secure, reliable “clouds”?
Demand for “cloud” services is expected by Smith to be one of the drivers behind increased IT spending this year – whether it’s a lower or upper case V.
Any increase, said new NCTA chair Nicholas Kottyan of DataChambers, is fine with him.
Said Kottyan: “I’ll take a small v after what we had in 2009.”
The crowd’s response – laughter and applause.
Amen, brother. Amen.
Get the latest news alerts: at Twitter.