From the counterintutive files: IT demand is...up?

The headlines are dreary but parts of the country actually are reporting upticks in demand for IT products and services.

(Credit: CNET News)

I know. Sounds crazy. What with more than a few on Wall Street ready to contemplate ritual hara-kiri as the economy goes from bad to worse, this sounds implausible. But paging through the Federal Reserve's district-by-district review of current economic conditions, a couple of counterintuitive nuggets suggest that there remain pockets of strength. Consider the following:

•  IT companies serving the districts around Kansas City and Minneapolis describe conditions as "stable to up."

The Minneapolis region particularly benefited from what was described as "solid demand" from clients investing in projects in hopes of reducing costs. (That finding should be sweet music to the technology industry as it echoes the arguments made by proponents that a recession is exactly the wrong time to slow down IT investments.)

•  IT activity in the Boston region has dropped but some firms report "strong revenue growth" over 25 percent.

In New England, the area's IT firms--and this includes both software and services companies--were able to hold their selling prices. This came despite pressure from customers for different payment plans (while at the same time, it appears some clients are taking longer to pay).

"While some firms have reduced headcount and frozen wages, others are making selective hires and intend to give raises in the range of 3 percent to 4 percent," according to the report.

I'll let bigger brains than mine figure out what, if any, all this portends. But on a related note, check out this write-up of the Department of Labor's February jobs report by my ZDNet colleague Larry Dignan. Again, the numbers overall were dreadful as the economy lost 651,000 jobs in February and the unemployment rate ticked up to 8.1 percent. But as Larry notes: "The data indicates that there are more computer systems design and consulting services gigs than a year ago. There are also more communications equipment manufacturing jobs than a year ago."

This bears close watching. With billions of dollars in stimulus money set to pour into the clean-tech industry, maybe hope for the proverbial silver lining isn't entirely a pipe dream.

[Stan Scott]

Companies are very keen to reduce costs using IT -- especially when it means eliminating jobs.

[LiamGunes]

Why would this seem counter-intuitive? I.T. is all about doing more with less, in essence a force multiplier for organizational processes. The classic example from Ford Motors described in Hammer and Champy's book on process process reengineering demonstrates the potential of technology to contribute to the competitiveness of a firm, particularly in lean times.

The real thing to keep an eye on is, will there be enough qualified professionals in the US to support this trend.

[smokified]

Thank God there are still some intelligent people on this site.

[smokified]

I work for an IT service company (meaning that we manage many clients as opposed to one network) in the Minneapolis area. I would say that it is almost astonishing how many people are doing away with the in-house IT department and moving to IT service companies instead. I would say that this probably has a lot to do with the current trends being seen in this area. IT service companies can also provide service to a more broad spectrum of clients (from the 1 man show to the10 location conglomerate) whereas you usually see only medium to large size companies with in-house IT departments. This allows them to keep a larger staff.

[mbenedict]

IT traditionally does ok during downturns, because certain types of IT investment can make businesses more efficient, and some IT projects can show immediate ROI -- unfortunately by reducing (possibly non-IT) headcount.

E.g., during the last downturn I was part of a massive sub-project (tens of millions of $ in that sub-project alone) which was easily justifiable because it practically eliminated an entire department from the bank (about 100 full-time employees.) The employees weren't all let go, but the project allowed the bank to keep the same number of employees while expanding their core areas -- as opposed to needing to hire & train new employees.

So what's more surprising is that IT spending has been down overall in this downturn. I think the latest projections predict 2009 IT dollars world-wide will be the same (zero growth) as compared to 2008 (which means it's a cut after considering inflation.) Just last quarter analysis were still predicting solid IT growth for 2009.

Of course I work in the financial industry where massive amounts of cuts is the norm now. Banks are freezing all but the most essential projects, such as those required for regulatory compliance.