Why Forrester CEO thinks tech won’t suffer as much in this downturn

Forrester Research Chairman & CEO George Colony is also a blogger. And earlier this week, he spelled out his argument for why this recession will be different for tech than the last one in 2001-2003:

“Tech suffers when GDP growth stalls — that is always the case. But the tech environment has transitioned since the 2001-2002 hurricane — meaning that this time around will not be as severe.”

My thinking has been similar. This time won’t be nearly as bad for Silicon Valley as a few years ago. Really, how could it be? We were ground zero back then. Now we’re just going to be collateral damage. Yes, we’re starting to see layoffs and slowdowns. But the sky won’t be falling like it was back then when we lost 200,000 jobs.

Still, I wanted to hear more from Colony on this. So I spent a few minutes with him on the phone Wednesday. First, let me summarize his overall thoughts on why this recession won’t hit tech as hard:

1) Tech will be down, but not out.

2) Transformation and innovation will lead recovery. “CIOs and CEOs are telling me that they plan to change their way out of this mess.”

3) Tech is everywhere. “It’s seven years since the last recession. Technology has become markedly more pervasive in that time.”

4) Customers live on tech. “The consumer landscape is very different than it was in 2001. Forrester’s consumer surveys show that each succeeding generation takes more tech into their day-to-day life.”

5) Tech issues are burning. “There were no big tech changes afoot back in 2001-2002. Not true now.”

When we chatted, I asked him to elaborate on some of this points.

“We’re not talking about increasing the spending,” Colony said. “We’re talking about retaining their spending. Goldman Sachs has to become a commercial bank. And to do that, they have to spend money on new systems. They’re no way they can say we’re not going to do that.”

Back in 2001 to 2003, the Web was new. And so when the downturn hit, companies just stopped spending assuming it was something they could put off until later. But Colony argues that could cause lasting damage to companies that don’t invest right now. The Internet is only becoming more and more central to business.

For one thing, far more people have broadband and mobile computing devices. And those numbers are growing. Companies need to spend to adjust to the new opportunities and demands, Colony said.

“There’s going to be some fluff in Silicon Valley that’s going to be eliminated,” Colony said. “I think some of the social companies are going to be eliminated. But some of the social technology companies are going to be transformative in this recession.”

Despite everything, Forrester remains bullish on consumer spending on tech for the holidays. He thinks devices like the iPhone at $195 will seem like a good value to many folks.

“In times of recession, when you’re out of a job, you want to network and communicate. This becomes a way to do that. I think consumer spending is always down in a recession. But I think some of the tech products which help consumers will do well.”

So what signposts will Colony be watching? Tech spending by large corporations, of course. Cell phone penetration rates. Broadband penetration rates. New initiatives around cloud computing.

“Some of those initiatives save money,” Colon said. “The cut down on operating expenses.”

If that holds, and companies decided to spend money to save money, Silicon Valley might limp through this thing okay.


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