Tougher and smarter IT purchasers will ensure that 2004, like 2003, will be a buyers' market when it comes to procuring technology and services, according to two leading financial analysts.
Companies are no longer prepared to be the guinea pigs for immature technology and have realised the glut of vendors vying for their business means they can afford to be patient, according to analysts Richard Kramer and Richard Holway, speaking at event on Tuesday organised by Deloitte and Touche.
Kramer, managing director of Arete Research, said that over the last few years IT purchasers have become smarter and realised they can push suppliers hard when it comes to pricing. "2004 is still very much a buyers' market. There are plenty of companies that want to sell to businesses and [customers] realise they can afford to wait," he said.
"There has been a real change on the part of the customer. They are smarter than before and realise if they wait an extra quarter for a new product, they'll get a discount," he added.
Companies are also increasingly reluctant to buy into unproven technology, Kramer explained. "Buyers have become very shrewd. They [companies] do not want to be the workbenches for suppliers any more." He claimed there are currently far too many IT companies competing for the same customers, and said that until there is some market consolidation vendors will be forced to keep their prices down.
The tough conditions also mean that more financial accounting scandals along the lines of WorldCom and Enron are definitely on the cards this year, Kramer said. "We will see more of these accounting scandals. If you think it all ended with Enron then think again," he added.
Also speaking at the event, Richard Holway, director of Ovum Holdings, agreed that present conditions meant IT purchasers were in the driving seat. "Some services companies I have spoken with say that unless they offer present customers a 20 percent discount then they will go out to tender and the vendor will be forced to offer an even larger discount to retain the contract."
The next 12 months and beyond will continue to be tough for the industry with little hope of a return to the kind of double-digit growth enjoyed in the past, explained Holway. "We are in a period when our industry will grow at a modest rate at best. We are really looking at GDP growth for the next 50 years."
But despite the slowdown, Holway said that some technologies -- such as wireless -- would have a big impact on the industry. "I really believe that the next year is going to be all about wireless. If the last ten years were all about e-enabling devices then the next ten years will be about wirelessly enabling devices."
To prove that he doesn't believe that it's all doom and gloom, Holway finished his presentation with a slide showing a partially rolled up umbrella and some sunshine -- instead of the customary fully extended brolly warning companies to prepare for the worst. "There is sun peeping out from behind the clouds but I don't suggest you throw your umbrella away just yet," he said.
