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Market Downturn: Solution Providers Tighten Belts In Anticipation Of IT Spending Freezes

Mark Haranas And Steven Burke

With the Dow Jones Industrial average plunging 1,000 points Monday morning, solution providers say they are tightening their belts in anticipation of IT spending freezes at businesses of all sizes.

"We are going to tighten our belt," said the CEO of a large national CRN Solution Provider 500 company that expects customers including oil companies to cut back on IT spending in the wake of the stock market downturn. "We are scrutinizing budgets and cutting costs."

The CEO said the market downturn is hitting his business hard. "This affects everything," he said. "Six months ago, everybody was on the top of the hill making money. This is like getting hit by a Mack truck." The solution provider is cutting back on travel to vendor conferences and keeping a tighter rein on marketing costs in the wake of the downturn.

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The Dow Jones industrial average rebounded Monday midmorning -- at that point down only 325 points -- but solution providers said they expect to see a topsy-turvy market that will impact IT spending. The Monday morning plunge came after the market experienced the biggest downturn in the past four years last week.

"This is not good," said a top channel executive, who was planning to sell shares in his personal holdings. "To the extent that this slows down the economy, it will impact everybody. You'll see IT spending put on hold to some extent. Some of it will be deferred."

Bob Keblusek, chief technology officer at Sentinel Technologies, No. 128 on the CRN SP500, based in Downers Grove, Ill., said the market downturn ’definitely could have an impact’ on Sentinel.

’In the past, if you look at a worldwide basis from an economic standpoint, there's always been a strong economy that's sort of floated or lifted things up, and that was China a little bit -- being a large economy, buying a lot of cars -- now they're really showing signs that they have some serious problems in their economy," said Keblusek. "We've had a pretty positive outlook for some time now, but it’s going to have an impact here. It's a little bit different because there really isn’t one economy out there that's really holding everything afloat -- everybody's got their own troubles right now, so that’s a change in what we've seen in the past.’

The market downturn could result in an uptick in mergers and acquisitions, said Keblusek. ’Maybe some VARs start to hit tougher times and they become acquisition targets,’ he said.

The CEO for a large national solution provider said more mergers and acquisitions could come to fruition in the midst of the market downturn.

"There might be more sellers that don't have a strong cash position and are panicking," said the solution provider CEO, who did not want to be identified. "We keep our eyes open in a market like this, either as a buyer or a seller. We are not actively looking to be acquired or acquire, but you have to be on the lookout all the time."


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