The IT sky is falling!

Things are looking a little dire out in tech land. At least, if you’re looking at it from the perspective of the stock markets. As most will know, the tech-heavy NASDAQ has been trading at under 2000 for a while now, still trying to find its bottom after a mostly downward ride from 5000 last year.

A large part of this has been the “popping” of the Internet bubble. For the last few years, it had been perfectly OK for a company to lose lots of money, and have no prospects for making any anytime soon, so long as they were involved with the Internet, or some other sexy technology.

The “new economy” it was called. And then it crashed. A slow down in the European market was blamed at first. Then a general softness in the IT marketplace. It seemed consumers just weren’t interested in upgrading all their hardware every eighteen months like the manufacturers were hoping.

Whether this is good or bad depends on your point of view. Investors are smarting, of course, but smart long term players will be buying up the depressed stocks of solid companies, waiting for the enviable up turn. Double and triple digit growth rates aren’t likely to return, but comfortable and sustainable growth is sure to.

On the other hand, for consumers of IT this correction is an opportunity. There’s a lot of “kit” in the supply channels, which means dropping prices across the board. Manufacturers to over-estimated demand must sell their existing stocks before they can introduce the next generation of products.

Intel and AMD continue to battle it out, with price drops and faster processors being announced every few weeks. Currently available are Intel P4’s running at up to 1.5 Gigahertz. 1.7 GHz versions are expected mid April, with a 2 GHz part available Q3. Not to be out done, AMD have parts available at up to 1.3 GHz, with faster versions expected shortly. In some cases, AMD chips can out perform faster versions of the P4.

Similar trends continue in most areas. Memory pricing is at an all-time low, with only slight increases expected for the next while. Hard drives and display devices, even PDAs, continue to increase in ability while dropping in price.

Almost makes one want to run out and upgrade. Except… What most people have on their desks is already good enough. If it works, why dump more money into a system? Consumers, and IT departments, are realizing that rather than upgrading a whole system, just adding more memory or a bigger hard drive is often all that’s really required.

From the perspective of the manufacturers, this is a big part of the problem. They’ve already saturated the market with computer equipment, with most businesses and more than 50% of all North American homes owning computers. If this market refuses to retire their old equipment, what can a manufacturer do other than lower prices and forecasts?

The soft market for computers is expected to continue for some time. Many people question if desktop PCs will ever again have the same demand, suggesting PDAs and mobile computing may replace them for most applications.

There is little question computing will continue to be important to industry and personal communications. Embedded and pervasive computing will only increase this. This correction has simply been a wake-up call for IT companies that they need to bring something new and useful to the table.

The graphical Web browser was the last “killer app” the computing industry has seen. Since then, the industry has provided very little that’s new, other than bigger and faster devices which most people don’t have the applications to even take advantage of. Until the industry has a compelling reason to upgrade, most won’t.

Published in the Victoria Business Examiner.

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