IDC: Looming recession to hit hardware vendors

IDC: Looming recession to hit hardware vendors

Fall in the Aussie dollar could lead to higher prices on hardware imports.

IDC is predicting a recession will hit hardware vendors hard

IDC is predicting a recession will hit hardware vendors hard

Hardware vendors will be among the hardest hit as the Australian economy slides into a recession, according to IDC.

Research manager for IT spending, Jean-Marc Annonier, said businesses will reduce spending on hardware items and extend refresh cycles; instead of every two to three years, it will mostly likely stretch out over four to five years.

“That’s one of the strategies that they’re going to put in place in the short term so they can use their PCs longer,” he said.

However, it’s not all gloom and doom as Annonier claimed servers and storage devices would not be affected as much.

“These are the things that you need to buy if you want to keep your data and equipment operating correctly,” he said. “The pressure on servers is going to lower because of the recession and people are going to use more visualisation to be able to reduce their costs on hardware.”

Annonier said the dramatic fall of the Australian dollar in the last few weeks against the US dollar - roughly 35 per cent - would see the overall costs of imports rising.

“The overall cost of hardware is going to be 30 per cent more than what it used to be,” he said. “How the channel can actually try to limit the increase of price has yet to be seen. I don’t think they’ll be able to do much about it.

“In the last few years they’ve been reporting on a high-volume, low-margin model, and they can’t really compress their margins by much, which means they’ll have to pass the increased costs to their clients.”

Despite the dire economic situation, the trend towards desktop and network outsourcing could accelerate, Annonier said.

“If organisations want to save money, they’ll usually opt for outsourcing,” he said. “Projects that are designed to improve productivity or really integrate multiple platforms like ERP and CRM, are probably going to go ahead for the time being.”

Other services such as consulting and integration will take a slight hit, while more offshore software development could take place.

“You still need to do some software development. Offshoring software development is going to get higher, meaning we’re going to see more and more software development back into India and China,” he said. “That’s not very good for the local industry.”

Annonier also claimed businesses will also cut back on travel.

“They might spend a bit of money on video conferencing, but otherwise it will be traditional voice,” he said. “Mobile data is still quite expensive but we’re going to anticipate that competition will take place, which will drive down costs.”

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Tags hardwareIDCrecession

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