Swift Victory May Open Door For Spending

A swift victory in the war with Iraq could be the catalyst that breaks the logjam in technology spending.

As geopolitical and economic uncertainties continue rising, companies have been in a holding pattern concerning future business plans. Executives--particularly those at large corporations,have been reluctant to make significant commitments to new investment spending.

But a quick and successful end to the war may lift the cloud of uncertainty. Technology spending should benefit, particularly in the areas of security, storage and basic infrastructure upgrades.

"If the war is swift, I think our customers will start spending again because they'll think the economy will pick up," said Bill Corbin, president of Network Catalyst, a networking and IP telephony solution provider in Irvine, Calif. "If [the war] gets dragged out, we'll see a slowdown, even more than we have now," he said.

Some solution providers report that their customers' infrastructure systems are beginning to break down, prompting an uptick in technology spending.

"The last major business technology upgrade occurred pre-Y2K, and we are starting to see higher failure rates among our customers," said John Milner, co-CEO of Jade Information Systems, a solution provider in Cold Spring, N.Y. "Businesses are generating proposals and exploring options to justify higher spending levels."

But the strongest spending gains, at least in the near term, are likely to be confined to the small- and midsize-business market.

Ninety percent of 140 large-company CFOs recently surveyed by Sanford Bernstein said their capital spending plans in general would not be affected by a quick end to the war.

Meanwhile, Insight Enterprises lowered its first-quarter earnings outlook last week, saying its large corporate customers are reluctant to spend money amid the existing economic uncertainty during wartime.

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