William Ehmcke, local MD for analyst firm META Group, agrees with a sentiment being felt across the globe that the tech market has generally slowed. Stocks are down, sales are disappointing and growth is plateauing. But this is no cause for panic, says Ehmcke. There is a difference between the above situation and the end of an era.
Ehmcke believes the present situation represents a perfect time for companies to plan ahead. They've bought the gear, now how are they going to use it?
-Over the last year, people have bought a lot of Internet stuff," Ehmcke says. -They've had to retool. But now there is a cooling down."
He attributes a year of massive industry growth, 2000, to various environmental deadlines - the so-called Y2K bug, the infusion of the GST, amongst others.
Factors such as these drove a -general renovation of back office systems" in late 1999 and 2000. For many corporates the world over, the issue of the year was upgrading or transplanting ERP systems in time. In time for midnight, December 31, 1999. In time for 9am, July 1, 2000. Hence the big spend. Hence growth.
But that spend is over. There will always be a need for software upgrades and new improved apps, but entire systems do not become obsolete that quickly, says Ehmcke. And those systems have only just been put in.
In keeping with the pattern, Ehmcke believes a lingering sharemarket disfavour still being endured by much of the hi-tech sector is also a natural reaction to a huge previous year. Well, the first four months it, anyway.
The main reason the market became so inflated at the time - before April 17 - was that the investors let themselves get caught up in global wave of sinking cash into shares without knowing what the companies did or how much money they were likely to make. Yearly fiscals later in the year did little to ease investor disappointment, private funding became more stringent, companies decided it might be a good idea to revise their strategies, and here we are. Expect some positive yearly reports later in the year, locally and overseas, and optimism in the tech sector of the sharemarket could be reality in Q4 2001, says Ehmcke.
To what extent will the Australian industry be affected by the slowdown in the US?
To the same extent, says Ehmcke. But in proportion. As he pointed out, a small dip in growth in the US would amount to a downturn locally of around 50 percent. Not pretty.
But also not how it works. Markets move, to some degree, in proportion to the economy of the country. And there is a local economy, not just a US-dominated global economy. If the Australian IT market slows a -little bit", that means a little bit in Australian, not US, proportions.
Likewise, a US slowdown may look horrific to us, but they're fifteen times - 1500 percent - the size of us to begin with. A billion to them hurts like a million does to us. A million to them, a thousand to us. In other words, they can take it. And we can take it too.
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