IT managers say downturn offers silver lining

Continued economic uncertainty is bringing IT managers some benefits, including lower prices from vendors and more success in filling critical positions.

But the bad news for corporate bottom lines, according to Michael Fleisher, chairman and CEO of Gartner Inc., is that many top corporate chiefs “do not believe that we are anywhere close to being in a recovery.”

“I think it’s a mistake to try to cheerlead our way to a recovery, which is exactly what people in the tech industry have been doing for the last several months,” said Fleisher, speaking at Gartner’s Symposium/ITxpo 2002. He added that this year will remain “a tough environment.”

How tough depends on the company. But some IT managers interviewed today at the conference say the downturn has actually helped them in important ways.

“Vendors have been extremely negotiable in price from last year,” said Lisa Skinner, assistant vice president for emerging technologies at the Pacific Life Insurance Co. in Newport Beach, Calif. She said she has seen dramatic decreases in systems prices from vendors.

But there have been problems, too, as some of the vendor start-ups the company took a risk on have failed. Fortunately, Skinner said, those companies were acquired by other vendors and Pacific Life continued to receive systems support.

The experience underscored the need “to have a fallback strategy if you need to move from one technology to another,” she cautioned. It’s also critical to keep an eye on the health of the vendors, she said.

Alan Werckle, IT professional resources director at Compassion International, a Colorado Springs-based nonprofit, said the downturn has prompted consultants to drop their fees.

Compassion, which receives about US$130 million annually in donations to help 415,000 children worldwide, recently hired a Web developer for $50 per hour. Last year, his rate was $90 per hour.

Werckle said that three weeks after hiring the developer, “we thought this guy was worth holding onto,” so Compassion raised his hourly fee to $75 per hour. “It’s been great for us,” he said.

Dennis Walsh, who manages the distributed systems group at Washington Mutual Inc., a Seattle-based bank, agrees that the downturn has made it easier to get better deals from vendors. “But I’m not sure how much the economy has to do with it, and how much it has to do that we’ve just been more focusing on doing that,” he said.

IT managers generally agreed with Fleisher that a recovery hasn’t yet begun. “It’s pretty much stagnated,” said Bruce Parshook, an IT director at Management Science Associates Inc., a Pittsburgh-based market research firm. He said his company has done well, despite the slowdown, and hasn’t been putting off projects.

Another company that has managed to keep moving despite the slowdown is San Jose-based eBay Inc. Speaking at the conference, Meg Whitman, eBay’s CEO and president, said her company has managed itself carefully.

“We actually understood that revenues have to grow faster than cost,” said Whitman, to chuckles from the audience.