Ouch...Bad News if its True
By pcr on Nën 09, 2004
The front page of the Wall Street Journal was depressing today with a lead article entitled Drag on High-Tech Recovery: Companies Do More with Less (Free this week only.) A few relevant quotes (read 'em and weep with me):
"Corporate spending on technology gear grew roughly 15% in the first half of the year...but...the recovery already is losing steam. The growth in corporate technology spending slowed to 9% in the third quarter.
The shift has big implications for the broader economy. It's terrific news for corporate buyers but is holding back a major driver of overall economic growth...Productivity, driven in part by technology, has risen for 14 straight quarters, the longest stretch in 60 years, though it too is showing signs of slowing."
"Forrester Research, which focuses on technology, says buyers are in a long period of 'digestion' that will extend until 2008. Corporate technology spending will grow only about 6% a year between now and then, Forrester says, as businesses figure out how to extract value from their purchases of the 1990s."
And this really hurts:
"Instead, tech buyers are most excited about new offerings that help them cut costs. Computer servers from Dell replace far more expensive models from vendors such as Sun Microsystems Inc. The free Linux operating system reduces software costs. Other emerging open-source programs -- which generally are available free of charge and are easily modified by users -- threaten traditional business-software packages from suppliers such as Oracle Corp. Internet telephone systems slash communications costs. Indian programmers reduce the cost of writing custom programs."
I see all sorts of problems with these assertions. If the period of 'digestion' runs until 2008, companies would be running on servers that are 10 years old or at least 3 generations out of date. At a certain point, the Mean Time To Failure of 10 year old electronic components rises to the level at which the servers must be replaced on economic/availability/supportability grounds. Not to mention that the increasing sophistication of applications tends to require later generations of hardware just to keep up with the complexity.