Greg Enright: Industry enduring a return to reality

As the networking industry heads into the final quarter of 2002, it’s apparent that the first three turned out much the way many observers expected: none too great. Cutbacks in spending by major equipment vendors, which most often took the forms of job cuts or research and development slashing, have continued unabated throughout the year.

The few optimistic voices that were heard chirping when the new calendar was ushered in, speculating that the sector would be back to its boom-time conditions by now, have unfortunately not grown louder. They have instead been drowned out by a cacophony of Worldcom woes and Nortel naysaying.

If anything, this year’s slow grind of negative news has impressed upon most industry observers that the giddy days of 1999/2000 are not likely to return any time soon. What’s also becoming apparent, however, is a much more reassuring reality: the networking/telecom sector is still a highly important piston in the Canadian economic engine. Its core technologies – the routers, cables, management tools, etc. – are just as desirable to organizations as they ever were before.

But because so many of the statistics that measure the industry’s strength are preceded by negative signs, it’s easy to assume that the sector is in a freefall. In most cases, however, these figures are being measured against numbers that represented an unrealistic time for networking.

Before equipment builders and telcos became afflicted with delusions of grandeur and began building infrastructures that were never going to be needed, the industry was marked by its slow and steady nature. Such was the case for decades. In the mid-’90s, however, the Internet came along, geeks were suddenly “in”, and, awash in such an unfamiliar glow, anything seemed possible.

Obviously, it didn’t take long for the light to fade. What’s been left over is the dull but steady hum of a bulb that rarely flickers. Customer spending levels on the essentials for running a network have declined in the past 12 months, but in many cases, they are only falling back to pre-boom levels.

This “return to reality” trend can also be seen on the part of vendors. Our story on Page 10 of this issue illustrates this point nicely. Yes, Nortel has cut R&D spending by 16 per cent, but the firm is still a research giant, spending $5 billion in the area last year.

Industry watchers can expect more negative signs to appear in the news for the foreseeable future. As long as the industry continues to view itself in terms that are relative to the blip of unreality that was 1999/2000, things will always appear to be on the downturn.

There is no denying that some product areas have been thrown for loops in the past 18 months from which they may never recover. For the most part, however, the pains being experienced today are an ugly part of our journey back to the real networking world that existed before the boom.

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Jim Love, Chief Content Officer, IT World Canada

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