That's the first time in eight years that we can expect a broad decline in profits. Mounting competitive pressures from excess global capacity will keep prices down, and increased productivity wont compensate for inflation. Roach concluded that, therefore, a period of stagnation in information technology spending is likely. The Morningstar organization, the foremost compiler of statistics about mutual fund performance, has just updated its quarterly indicators about gains by all domestic stocks and U.S. IT stocks. When the stock market dips even slightly, the technology stocks take a dive.
Investors seem to understand that whenever business suffers, computer budgets get squeezed.
The good times are coming to an end, and it couldn't come at a worse time. By and large, CIOs are accustomed to easy IT budget reviews and ample increases in funding. After all, most of them took their positions after the recession that ended in 1992. In the past three years, IT budgets have become encumbered with all sorts of ambitious ventures that depend on a steady increase in available dollars. It's unlikely that CIOs have put together contingency plans for when the budget crunch suddenly sets in.