IT still a bright spot for economic recovery

MISIBIS BAY, Albay – The past year has seen many stories citing IT as a stepping stone for global industries to recover from tumultuous global economic downspin. In the Philippines, the effect is not as bad as in other countries until the export industry took a hit when demand for products declined.

Semiconductor firms were among the worst hit as demand for electronic components worldwide.

While there were only a few large companies that either closed down or merged with other partners, the impact of the crisis forced many Philippine industries to rethink their investments especially on their IT investments.

It has been widely reported that IT investments in the Philippines may have declined but these continuous investments were focused on improving operations, at a reduced budget, and the output remaining constant, if not higher than before.

One study by the International Data Corporation (IDC) released in January this year, IT spending would reach 6.3 percent growth in 2009. This is smaller than what was previously expected but due to the relatively lower IT infrastructure penetration, the Philippines remains to be a huge market for IT infrastructure services.

A more recent study by Springboard Research also noted that public IT expenditures (those implemented by government agencies) will reach US$580 million by 2011. Michael Barnes Springboard Research Vice President for Software and Asia Pacific Research said this trend will continue to increase despite concerns of previous IT projects that failed, such as the 2004 poll automation and the controversial ZTE-National Broadband Network.

Realigning investments

At a press conference in Albay, executives from chip giant Intel and technology services firm HP cite trends among local and global industries that are realigning their investments. Just as what IDC and Springboard Research noted, companies are realizing the need to invest on new IT infrastructure mainly for two reasons: cost savings and competitive edge.

Incidentally, the topic of the three-day “Synergy” conference is “Propelling waves of recovery for growth,” which stresses on the ongoing trends of industries to invest in new technologies for economic recovery.

Intel Philippines Country Manager Ricky Banaag said some corporations have been looking at refreshing their IT infrastructure. Usually, a lifecycle refresh takes about four to five years before IT equipment is replaced or updated. But Banaag said some companies have shortened this to just three years.

Citing a service by Gartner that there are at least 1.1 billion computers installed worldwide, 35 percent of these are over three years old. As with the majority of computers installed are in enterprises, the IT lifecycle refresh market is potentially huge, offering IT equipment and service providers business opportunities.

Banaag noted that while the factors to drive replacement are different for both the enterprise and consumer sectors, the necessity is just the same and that is new and innovative features that make the user experience better. In the case of enterprises, it is the ease-of-use and centralized management of IT infrastructure, including those that have remote workforce.

Home consumers, on the other hand, want to replace their devices to allow for new types of online services, in particular blogs, videos, podcasts, social networking, and the like.

Not surprisingly, the recent refresh trend among enterprises is nothing new. In fact, every economic collapse shows companies speeding up their refresh program, again for the same reasons: keeping operational costs down while keeping up with competition.

HP Philippines Technology Services Country Manager Diana Dela Rosa said companies can even take advantage of economic crises as they can increase their business ranking, improving their reputation and building wider client base.

Dela Rosa said such industries where IT refresh is being seen are in the telecommunications, finance and business process outsourcing.

But the opportunities offered by economic crises can also have an opposite and negative effect on companies that start their IT infrastructure refresh without proper planning. As it is, Dela Rosa said investments can become a challenge of balancing what is currently needed and what is the long-term potential.

“Companies should modernize without compromising business competitiveness. IT expenditure should have room for optimization without compromising having a competitive edge,” Dela Rosa said. –Alexander Villafania, INQUIRER.net