Solution Providers Say $700 Billion Bailout Is No Panacea

Despite the passage of the $700 billion bailout package Friday by the U.S. House of Representatives, solution providers say they expect no quick fix to economic malaise sweeping the economy.

Instead, most are girding for continued market uncertainty fueled primarily by a credit crunch certain to make customers more cautious in their IT spending. While solution providers interviewed by Everything Channel said they have seen no new credit restrictions placed on them by their lenders, they remain concerned about the liquidity crisis might impact customers.

"Any solution provider that isn't taking a harder look at dispersing his credit liability is fooling himself," said Dave Gilden, COO of Acuity Solutions, a Tampa, Fla. solution provider.

Gilden said Acuity just completed its best month ever. "But two fairly good-sized customers put the kibosh on projects scheduled for next month," he said. "What I'm seeing is not a knee-jerk reaction but rather a proactive move on the part of customers who are waiting to see how things shake out."

Simon Palmer, president of STA, a Tustin, Calif. solution provider noted that his company finances it operations organically with its own cash. "There are times when that's questionable; there are times when that's a good decision. I'm hoping this is one of those times when it's a good decision," he said.

Palmer noted that he's seen no slowdown in business related to the credit crunch. "But I have a big question mark on Q4," he said. "I think people are going to hang onto their money to see this thing through and see what is going to happen."

Palmer said that the situation moved beyond the point of agreeing or disagreeing on the package. Rather he said the bailout is necessary to psychologically restore confidence in the markets. But he said that people with solid businesses should be able to weather any economic storm.

"If you have a decent balance sheet and a decent business and a demonstrated history and a business plan for the future, [banks] are going to lend you the money," he said. "We have been through five years of a little bit of false prosperity. Some people who had marginal skills were doing really, really well and maybe those are the people who are suffering now."

Some solution providers, however, worried that the $700 billion rescue package had been rushed through the Congress without any Congressional hearings.

"This [the lack of hearings] is unprecedented, except in the case of war," said Dan Evans, president of Nexus Information Systems, a Minnetonka, Minn. solution provider. Evans said he wished the government had instead shored up funding for the FDIC and let those who made risky investments fend for themselves.

Evans said putting $200 billion in the FDIC instead of throwing $700 billion at the market would give banks an instant infusion of cash to lend to credit worthy customers and provide more liquiidity to tight credit markets.