Ballmer: Financial Crisis Could Hit Software Demand

Microsoft CEO Steve Ballmer is generally a pretty upbeat guy. So earlier this week, when Ballmer expressed concern over the potential impact of the financial crisis on software demand, many solution providers took notice.

In a Wednesday interview with Bloomberg, Ballmer said it's possible that the financial crisis could trigger a pullback in IT spending among U.S. companies, although he stopped short of predicting that this would actually occur. "Nobody knows exactly what's going to happen," Ballmer told Bloomberg.

Bob Shear, president of Greystone Solutions, a Boston-based Microsoft partner that works with numerous financial services firms, has recently seen several key clients delay large projects. "I think a lot of businesses had a soft Q1, and then things filled in over the summer, and it looks like Q4 is going to be soft again," he said.

However, solution providers could actually be affected in a positive way, to the extent that people will be reluctant to hire and will decide to fill the gaps with solution providers, according to Shear.

"What could happen to VARs is that the competitive landscape changes and everyone reaches down a tier, say, from $10 million deals down to $2 million deals," Shear said. "So, if the crisis goes on for a couple of quarters, we'll probably see larger solution providers reaching down into our market."

The crisis is double-edged sword in terms of technology spending, because as some opportunities dry up, other ones materialize, says Michael Smith, a Microsoft Exchange MVP based in Charlottesville, Va.

"I've seen a number of clients slow spending on new hardware and software, unless it can yield quick ROI and reduce costs, which is the case with virtualization," Smith said. "Opportunities also exist in providing consulting services to help clients properly and fully utilize the resources they already have in-house, but have never learned how to use."

Ric Opal, vice president of Peters & Associates, an Oakbrook Terrace, Ill.-based solution provider, is concerned about the potentially wide ranging effects of the financial crisis, but says certain parts of his business remain strong.

"Frankly, we haven't felt a slowdown at all in our services delivery," said Opal. "We're keeping our eyes forward and making business bets that are focused on driving revenue and decreasing operating expenses."

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