IT expected to ride out economic storm

IT expected to ride out economic storm

Despite gloomy forecasts, two of the country’s largest distributors believe the technology industry will weather the storm of an economic slowdown.

On Tuesday, the Dominion Post reported that Bank of New Zealand economists believe a “technical” recession looks increasingly likely for the first half of the year.

Official economic growth figures for the March quarter are due to be released today, but experts are forecasting that the economy will shrink by 0.3 percent.

Their outlook for the next quarter is just as bad, which sets the scene for a technical recession, which is caused by two consecutive quarters of negative GDP growth.

However, both Ingram Micro and Express Data expect the IT industry to remain strong as it is ideally suited to help businesses deal with the pressures of a slowing economy.

Ingram Micro managing director Jay Miley says while he is concerned about the economic forecasts, he is not losing sleep yet.

“Things are slowing a little. But IT will continue to be a strong sector, especially if we focus on addressing real business issues.”

Many of the factors that are causing economic turmoil locally are not unique to New Zealand, but are due to global forces, such as increasing fuel and food costs, Miley says.

“The solutions and products our industry offers help address how businesses deal with these increased costs. IT is in a great spot – we can help people enhance their productivity.”

If the economy slows, CEOs need to become more resourceful and begin to focus on improving productivity, says Miley. “This is good for resellers who focus on solutions that make existing employees more productive.”

Express Data general manager of sales and marketing Paul Plester agrees, saying new technologies such as virtualisation deliver real efficiencies. “There is real and defined payback on some of the new stuff coming out. Government departments in particular are looking at that real hard.”

Express Data is not seeing signs of a significant slowdown, adds Plester. “Quite frankly we don’t expect one. The fundamentals of the New Zealand economy is that we have a lot of exports being sold and we still have money flowing through the economy.

“I believe the business is there – in fact pipeline has never been larger.”

However, Miley concedes Ingram Micro is starting to feel the pinch as higher fuel prices are driving up the company’s transportation costs. “It has clearly put a squeeze on us. This makes it tougher for a distributor to do what we do.”

Up to now Ingram Micro has absorbed higher transportation costs and has not increased its delivery charges to resellers, but Miley acknowledges that this is not sustainable in the long-term. “I’m concerned about how long we can continue to do that.”

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