Bidding adieu

The impact of the financial crisis is likely to be felt most acutely by the thousands of smaller IT vendors that have sprouted in the region.

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By  Sathya Ashok Published  November 19, 2008

Has there been any day in the recent past that you have not heard about the financial crisis?

Stock markets have been falling, if not crashing, and institutions around the world either are already feeling the pinch, or are waiting on their toes, preparing themselves to be hit by the tidal wave.

However, if you think you have had an overdose of it already, then be warned that this is just the beginning. According to most analysts, the world is yet to feel the true, large-scale impact of the crisis, and they expect this to happen in the first half of 2009. In fact, this week market analysis firm IDC has been busy revising its previously quoted IT growth figures, and adjusting them suitably downwards to account for the crisis that nobody saw coming.

The question for the IT industry right now is, how will this crisis affect the Middle East? Will it really entail projects being cancelled or put on hold? Or will things continue largely the same?

Most vendors have yet to notice any projects being radically altered or cancelled in the region. Most state that it is business as usual, at least for the moment. However, annual IT budgets are being formed as I write this piece, and most end-users I have spoken with are either cutting back, revising or building in flexibility into their budget plans to prepare for any surprise changes in the next year.

Considering that many projects are long-term and ongoing in the region, what we are likely to see in the immediate future, is that enterprise users will curtail their IT budgets to the completion of projects that they have already started. New projects will almost certainly become fewer in 2009, and everything that was in the planning stage may continue to remain on paper into the first half of the new year.

Such necessary caution among IT heads will also demand that they make technology choices, which have been tried and tested, for their organisations. Not many will be ready to place their bets on new, untested or pioneering technology, as they look for investments that have a proven return.

This same mentality will also drive them to spend their money, when they do so, on solutions from well-known, established vendors. Bigger companies, that have been around for a longer time, and have built their brands are likely to the be the first, if not only choices, for enterprise investments as budgets shrink, and CIOs look to make every dirham count, in terms of not only product capability but also support and service factors.

If the crisis pans out in 2009 as many believe it will, then the true impact might be felt by the thousands of smaller IT vendors that had sprouted in the region over the past two years. These companies of the boom time, are likely to go bust as customers cut back and look for reliable returns, or get acquired by the bigger players (if they have something of real value to offer in terms of solutions or customers).

This consolidation is likely to give a much more comprehensive, and altogether less confusing set of choices for the enterprise customer. Every market needs the bad times as much as the good times in the process of maturing. This crisis could likely have that impact on the region, and the Middle East can emerge from the downtime much the wiser, on the end-user and vendor side.

It is rather inevitable that some vendors, and some end-users, are likely to suffer more than others, and might have to bid adieu. However, the period that comes out of the storm is likely to provide a much more stable and established environment of growth.

One way or the other, 2009 promises to be a very interesting year.

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