IT industry could be blindsided by fiscal cliff

By Colin Neagle, Network World |  IT Management

"My experience within our membership is that not all of our companies have a huge amount of political interest, so not all of our companies follow it day-to-day," he says.

Of course, those who did seek out information on the fiscal cliff were misdirected by the politicians charged with preventing it, Whitman says.

"Our whole nation has been preparing for this, saying 'we won't go off the fiscal cliff' - both sides saying 'we won't go off the fiscal cliff.' I'm not really sure that businesses have stepped up to the plate and prepared for the possibility that we might go off the fiscal cliff," he says.

Whitman says, at this point, "This is not something that you can just retool your business for." 

Richard Davis, managing director covering enterprise software for investment bank Canaccord Genuity, says that although IT companies have options to help soften the blow, smaller margins in 2013 may be inevitable.

"I think there's sand going into the gears of every company," Davis says. "Does it cause the engine to completely grind to a halt? No, but it probably slows it down."

Specifically, Davis says the vendors most likely to lose business are those that can't prove an exact return on investment for their products.

"If you deploy the software and you say 'when you deploy the software everyone is going to be more efficient,' in other words, [users] can share better and those kinds of things, those are harder to prove because there's no hard-dollar ROI," Davis says.

Just like any other business, those in IT should have been more aware of these threats earlier on, and should have begun diversifying in preparation for the financial impact, Whitman says. However, given the conversation among elected officials, it's not a surprise that these businesses have been caught off-guard.

"Those businesses should have been branching out and looking for non-government-type business," Whitman says. "But I don't think that a lot of companies have really believed that this would happen, and we're still told to believe that it won't happen by our politicians."

CompTIA has addressed the federal government about the impact of its measures on the IT industry, specifically regarding the loss of funding for information technology training and educational programs. However, Whitman says some members of Congress appear to be as ill-informed about the full reach of the fiscal cliff policy changes as the private businesses assuming the risk.

"We have gone to speak to Senatorial offices or offices from the House of Representatives on this particular issue," Whitman says. "It's an 'aha' moment [for them]. It's like 'wow, they didn't know that.'"


Originally published on Network World |  Click here to read the original story.
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