Technology Investing

Two differing viewpoints on technology and its future. NYTimes is of the view that “investment in technology is roaring softly back” after more than 3 years while WSJ feels (from a stock market viewpoint) “tech’s reign may wane as the US economy stabilises.”

Writes NYT:

Business spending on information technology – computer hardware, software and services – increased at an annual rate of more than 15 percent. This, in fact, was the second consecutive quarter of encouraging growth for information technology investment, which also rose more than 15 percent in the three months ended in June.

A crucial question, analysts say, is whether the recent strength in technology spending can be maintained. Some of the gains, analysts and industry executives say, are a result of companies’ finally buying new personal computers and getting rid of machines that were purchased years ago but were not replaced during the economic downturn. That effect may fade in the months ahead.

The technology investment by small and medium-size companies has so far been stronger than by large corporations, who have tended to be the most reluctant spenders. Yet signs are emerging that big companies, too, are getting ready to spend more.

What are the drivers of this increase in technology spending? Adds NYT:

That shift is the advance of technology from the personal computer industry and the Internet into all facets of computing, especially data centers that have traditionally been the bailiwick of mainframes and big computers running Unix software. Increasingly, these costly machines are being supplanted by lower-cost computers powered by PC microprocessors, produced by Intel or Advanced Micro Devices, and running Microsoft’s Windows or the open-source Linux operating system.

Software applications written by companies are increasingly conforming to Web technology standards, which can be written quickly and are available for access on any device that has browsing software.

Even companies that have been paring their overall technology spending in recent years are, at the same time, investing in lower-cost PC-based computers and shifting their software development to Internet and Web standards.

The WSJ view: “There’s no denying the clear leader in the stock market since the start of the rally that began in March: technology. These glitterati of the bubble era triumphantly bounced back from their despised state to rule the stock market anew (though they still remain well below their peak). But some market strategists are warning the shine is about to come off.”

My view: I don’t know much about stocks, but as a sector, investments in technology by businesses are going to continue, fuelled in part by the small- and medium-sized enterprises. Even though the views are more US-centric, I think the opportunity for providing tech-enabled solutions to increase productivity of SMEs in emerging markets is very significant.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.