You are correct in that the current economic environment is probably
the largest factor depressing technology sales. However, there are
four others that are significant.
First, companies spent an atypical amount of money on information
technology to cope with the year 2000 problem. As a result, companies
entered 2000 with very current software and hardware, much more so
than had been customary historically. Since most companies view
technology purchases as having a three-year lifecycle (and with the
down economy, many are stretching this to four or five years),
companies have not needed to purchase a lot of replacement technology.
In the absence of significant economic growth, there has been no need
to add technology, either. With lots of layoffs, for example, many
companies find themselves with more PCs than they need. Also, telecom
companies have enormous excess capacity in their networks, so they
have little need to invest further at the present time.
Second, there has been a presumably temporary lull in highly
attractive technologies experiencing widespread adoption. Databases
were followed by Enterprise Resource Planning systems bolted on top of
databases. Then, the Internet was connected to both. However, there
hasn't been a really dramatic new technology since the Internet to
drive significant growth in technology spending. Customer Resource
Management and Supply Chain Management have been absorbed into
Enterprise Resource Planning systems rather than becoming a large
entity unto themselves. To some degree, wireless networking has driven
some technology spending, but not to the extent that the Internet did.
Third, technology prices have continued to drop, and previously
expensive technologies are being replaced by much cheaper ones,
leading to an overall decrease in sales volumes in terms of dollars.
For example, companies have the option of buying inexpensive Windows
or Linux-based blade servers instead of expensive, proprietary servers
from the likes of Hewlett-Packard and Sun Microsystems. This
phenomenon has severely hurt high-end server sales.
Fourth, many companies rushed into technology purchases during the
boom and have found themselves with technologies that are poorly
utilized or do not work at all. While many projects were eventually
successful, many companies suffered a great deal of pain during
implementation. Hershey and Nike, for example, suffered sales
declines because of problems they blamed on software implementations.
Companies have gotten smarter about purchasing technology and are much
more skeptical about salespeoples' claims than they were a few years
ago. With budgets being much tighter, companies are much more
disciplined in their technology purchasing habits and demand greater
assurance that the project will generate the returns promised. They
also realize that a major technological implementation is inherently
risky and can be severely disruptive to the business in the short
term. Without a desperate need for the technology, many find it easy
to postpone nonessential projects until the economy improves.
I hope this has helped you to better understand the major issues
currently faced by sales forces in the technology sector. As the
country's capital stock of technology infrastructure is aging, there
are some signs that some of these difficulties may be beginning to
abate.
Please request clarification if it is needed.
Sincerely,
Wonko |
