Economy, Not Election, Can Impact IT, Says 'Joe The VAR'

But when it comes to how the economy and the election impact the IT market, one needs to talk to "Joe the VAR," who says that things are tight but that opportunities abound for those willing to look beyond the news of the day.

Joe "the VAR" Kadlec, vice president and senior partner of Consiliant Technologies, an Irvine, Calif.-based storage solution provider, said that he thinks the U.S. is in a world of hurt because of the continuing swings in the economy, and that will tighten things up for the channel.

"And from a VAR perspective, I believe things will tighten up," Kadlec said. "But in a down economy, people who look for opportunities can find success. When people tighten up, there are other places to find opportunities."

For instance, Kadlec said, as the economy tightens, consumers tend to go out less, eat out less, and go out for drinks less often.

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"So they spend more on home entertainment," he said. "And as we speak, I'm writing a quote for a home entertainment company which is seeing its sales grow. Or instead of going out for a drink, people instead mix more margaritas at home. And one customer of ours with 500 trucks delivering products for such people is looking at implementing new technology."

Kadlec expects Tuesday's vote to be tight. "We have a little office pool here based on the number of electoral votes the winner gets," he said. "I guessed 290 votes for Senator Obama. It doesn't mean that's where my vote goes. But the closest guess without going over the final number wins."

Kadlec said he also feels sorry for people who lose their homes because of the economy. "How could these large mortgage companies make those adjustable mortgages when the mortgage rates were at their lowest level in 40 years, and when they knew rates were going to rise?" he said.

Joe "the VAR" Toste, vice president of marketing at Equus Computer Systems, a Minneapolis-based solution provider, said that the IT business has run into a "perfect storm" as issues regarding the return on investment of upgrading, macroeconomic uncertainty, and channel consolidation all converge.

"You've got to button down the hatches to weather out the storm," Toste said.

Toste said uncertainty is hurting small businesses, but that business with enterprise data center and other enterprise customers is still stable for now. Equus works with partners on enterprise and large data center projects where talk about the economy has little impact as the money needed is already allocated.

"It may impact the next project," he said. "But it won't stop this. Maybe the deployment schedule will change, but not the project."

Toste said he is tired of hearing every day the talk about cutting taxes or raising taxes, or about "Red" vs. "Blue," when it's the uncertainty in the economy that has the biggest impact in the small business market.

"An SMB can stop a purchase right away," he said. "If it originally needed a new fax machine, it can say, hey, I don't need it. So the uncertainty can impact the small business customer. But at the midrange and enterprise, it has less impact."

A lot of small businesses and small business solution providers buy on emotion, and so when they see uncertainty on the news, they can decide to not make a purchase, Toste said.

"They want certainty and consistency," he said. "And when they don't get it, they stop planning. They can stop the migration to new PCs until next year, or the move from 10 desktops to five desktops and five laptops. They're more concerned about uncertainty in the market than about whether Obama will raise their taxes."

Small businesses don't say that Obama is good, or that McCain is good, Toste said. "They want stability," he said. Small business will persevere despite the politicians."

For those in the government sector, spending may slow down for next year, but this year they're riding out existing contracts, said David "the VAR" Kriegman, who became president of TechTeam Government Solutions in August.

Kriegman said that procurement cycles are taking a bit longer, and new initiatives have slowed down compared to in the past.

"I'm not sure though if that's solely because of the economy, or due to the political situation of it being an election year," he said. "The war on terrorism, the war in Iraq, those things have affected discretionary dollars. But it really hasn't touched civil agencies any."

Those civil agencies are unsure of the future, and are in turn becoming nervous about the future of programs and spending, Kriegman said. The largest impact, however, may be on productivity during a time when many employees are preoccupied with the performance of stocks they may own.

"The biggest effect of the current economic situation is on employees, worried about their 401Ks," he said. "That impacts business."

Whether Obama or McCain wins on Tuesday, it is unlikely to have a big impact on government spending -- right away, Kriegman said.

"Both candidates have indicated they are not going to change defense spending, but they may change where allocate money," he said. "They may shift priorities within the defense budget. Probably not in 2009, but in 2010. The 2009 budget is pretty set, but the new administration will have a short time to work on a 2010 government budget. We'll see where their priorities fall: health care, energy, etc. My personal opinion is that the economy will come back, but nether candidate will make it happen fast. Either candidate will have to look to IT. The government has got to keep working, and working efficiently. And industry has a responsibility to help the government figure it out."