The last few weeks have been depressing for the technology sector in the USA. Disappointing earnings growth and depressing outlook statements provided by most of the tech firms highlight the low investment climate in the US and the dark clouds that continue to hover over the global economies. With the high dependence on global sales that American tech firms have and worries about the impending fiscal cliff, a move towards a second recession caused by tax cut reversals and higher costs imposed on some sectors could cause further declines in capital goods orders and discretionary spending by corporations which is not good news for IT folks! Being the proverbial ?canary in the coal mine? or a barometer of the global economy, as one San Francisco portfolio manager has called it, the weakness in tech does not augur well for the global economic recovery either.
Ten days in the US with meetings on both coasts gave one the confidence that the White House, with the President in his second-term will pull out all the stops to engage corporations and politicians across the great divide to stop the economy from careening over the fiscal cliff. And it?s not all bad news for the US economy either. Housing is coming back which is always a good sign and consumer debt is at record low levels with most Americans having slowed down on their propensity for profligate spending in the last couple of years. The confidence in technology innovation and energy independence is also leading to the conviction that American manufacturing is coming back which will create the jobs and cascading prosperity that has been missing in the US for many years. And whether or not one believes the ?greatest nation on earth? assertion that President Obama made in his acceptance speech, there is no doubt that a robust America is the surest hope for a stronger global economy in the medium-term.
Interesting trends have emerged too in the adoption of cloud, big data and social media in American corporations. While social media companies like Facebook and Zygna have lost their way and their market capitalisation in recent times, the good times continue for ?software as a service? pioneers like Salesforce.com. The stepping stones to the cloud that had been laid by corporations in the last few years have now blossomed into what looks like an inter-state information superhighway with CIOs jostling for space in their path to an asset light pay per use IT infrastructure on the cloud.
Moreover, the success of the Obama campaign with its ability to capture large chunks of nation-wide data and mine slice and dice the data to target each segment of the voting public and get them out to the polls has been lauded as a triumph for Big Data, which will also hasten the adoption of new technologies for data warehousing and business intelligence within government and business. It may have been a bad quarter for most companies including IBM, Apple, Dell and Google but the resilience of firms like Cisco shows that there is still money to be made in corporate America even as spending patterns change in a recession wary economy.
Indian IT can take heart from the fact that corporations in the USA, our biggest market are still not negative about the future and will probably get a better hearing from the new administration as it seeks to forge a common agenda to first avert the fiscal and then find a robust path to recovery for employment and the economy. However there is much to be wary about, particularly for our top tier companies which are dependent on huge capital spends by large customers. These companies are worried today both by a projected lacklustre Thanksgiving and holiday season and the slackening of demand in China and Europe. A new team running China is expected to be good news for the economic recovery but low appetite for substantial construction and manufacturing projects in China could be a pointer to lower investments in the US as well.
As we near the end of a troubled calendar year, it is difficult to predict exactly how fiscal 2012-13 will end and what the economy has in store for us in the coming year. Nasscom has been sagacious in holding on to the lower end of its projection for double digit growth in this year though it will take a brave punter to forecast today if the IT outlook will be better or worse in 2013. However, there are still opportunities and discontinuities that exist in the global tech marketplace that can be chased and served by global tech firms as well as Indian product and services exporters. The ability to choose areas for investment and the willingness to invest in a new agenda for transformation is the key to differentiation that every company must seek to stand out in a choppy business environment!
The writer is vice-chairman & CEO of Zensar and chairman of the National Knowledge Committee of the CII
