Irish Computer Channels - 1 April 2008

Suppliers and customers at odds over economic outlook

A recent survey by Syscap, an independent pan European IT finance provider, revealed surprising disparities between die market expectations of suppliers and those of corporate customers. One of the big questions, considering the current world economic situation, concerned the effects, if any, of the credit crunch. According to the survey, 42% of suppliers thought it would affect their spending plans and their customers' spending plans this year. Only a quarter did not believe there would be any impact. As an indication of how concern about the credit crunch has moved up the agenda, only 20% of suppliers said it had affected spending plans in 2007.

But here's the interesting point: according to the same poll, only 17% of Syscap's corporate clients thought spending plans would be affected in 2008 because of the credit crunch, and a significant majority (60%) said they would not be affected at all.

As the polled groups cannot both be right - and there is a very pronounced gap between the expectations of suppliers and corporate customers - we have to conclude that the two parts of the supply chain are not linked us tightly as they could be.

Further signs of this dislocation between suppliers and corporate clients are seen in their responses to how they think budget allocation will be affected in 2008 for hardware, software and services. While the two sides were more or less in agreement over hardware (about a quarter thought budget allocation would increase, a similar number thought it would decrease, and more than 40% said it would stay the same) there were glaring differences when it same to software and services.

In both cases, suppliers appear to have been hugely overoptimistic in their predictions. As many as 54% predicted an increase in budget allocation for services and 40% thought the same for software - but the corporate clients weren't playing ball. While one in four agreed the allocation for software would increase, only 16% said the same for services. As many as 63% thought budget allocation for services would stay the same, and the figure for software was 49%.

What are we to make of these seemingly contradictory responses? Extrapolating from their more cautious view of the effects of the credit crunch in 2008, suppliers are expecting customers to devote more spend to services and software, perhaps in an attempt to gain more efficiencies from their existing infrastructure. Paradoxically, corporate clients are not greatly worried by the credit crunch and do not appear to be planning any great changes in their budget allocation for hardware, software or services, suggesting that they think 2008 will be much like 2007.

It may be that suppliers will need to adjust their message to reflect the reality as perceived by corporate clients. Alternately, if the suppliers are right about the effects of the credit crunch, clients may well end up changing their position. At the moment, however, the corporate clients are the people with the money (or financing) to spend so, if they're right, there could be a few disappointed suppliers this year - and some pleasantly surprised ones too.

As for the channel, if they follow the suppliers' lead and focus more on software and services as a growth and value added opportunity, they may be caught out if the corporate clients turn out to be right. But if the suppliers arc right, there could he some really strong business opportunities this year.

MacInnes, Billy

Irish Computer Channels