CIOs like Verizon’s Shaygan Kheradpir are cutting back on where they spend their money – the focus has shifted from spending money to seeing how companies can save money and improve profits. This approach is not good news for IT companies, according to a WSJ article.
Chief information officers for the biggest U.S. companies expect their technology spending this year to decline an average of 1%, according to a Goldman Sachs survey done in December. That’s after a 6% drop last year.
For one thing, corporate computers are becoming more like commodities. With wider adoption of software standards, the machines are more interchangeable, making it easier for Mr. Kheradpir to play one manufacturer off the other. Foreign technology has improved, so that Verizon can hire Indian companies, for one-third the cost, to handle programming once done by American firms. Better software can reduce the need for costlier hardware. Mr. Kheradpir has curtailed his buying of data-storage devices because new software allows him to use all the capacity of machines he already has. And eBay has made equipment prices more transparent.
We are in an era of “cold technologies“, which shrink the overall revenue pie instead of growing it.