Special Assistant To President's National Economic Council Gives Forecast

"To the extent that we have surplus capacity, that is to say to the degree that we overinvested in technology, then we have to expect tech sector growth to lag what it otherwise would have achieved," said Bonilla. "We have to in one way or the other whittle away at the surplus capacity."

The "irrational exuberance hangover" that is affecting the technology marketplace will determine the industry's near-term future, said Bonilla. "It is hard to come to any conclusion other than the straightforward acknowledgement that we overinvested in technology during the bubble of the 1990s," he said.

At the same time, Bonilla cautioned that the tech sector could grow faster than the general economy even with the "overhang" in spending. "With the overhang, though, it will grow less rapidly than it could have otherwise," he said. "That overhang will disappear over time from a combination of capacity utilization and obsolescence. But until it does, it will remain a drag on the industry."

Bonilla said the only way to determine when the surplus capacity will be depleted is to analyze each segment of the industry separately. For example, he said, there is a large overcapacity in fiber optics and broadband. "We went on a very big [technology buying spree; that is one of the reasons we have such good productivity growth right now," he said.

Bonilla said to a degree the outlook for the tech sector depends on whether solution providers can convince customers there is "enough advantage in that next-generation hardware and software for them."

Further complicating matters is the accounting and finance scandals, which have left the American investor "increasingly of the opinion that the game is rigged against them," said Bonilla.

Ultimately, Bonilla said that the tech sector marketplace has to live with diminished expectations. "Part of this is coming back to earth and recognizing that the bubble is exactly that," he said.

Bonilla applauded the industry trend among solution providers to provide services that allow customers to get more productivity gains from the technology they have already purchased. That philosophy is what led to dramatic gains for outsourcing companies such as EDS.

"In the short run you'd rather sell more new hardware than patch together what they have," he said. "In the long run it teaches them that technology is invaluable--that its life cycle is measured not in weeks but in years."

Bonilla said the tech sector is going through its first recession. "It was operating in a world where the sky is the limit," he said.

Bonilla said that it is unlikely solution providers are going to perform "much differently than the people you are selling to." General economic growth will ultimately stimulate demand for the tech sector, he said.