Timeline for Tech Comeback

But many quarters marked by disappointing earnings reports have forced overly optimistic forecasters to retract predictions of imminent rebound.

Midway through 2002, a slightly more conservative camp of experts is offering new insights into tech spending trends. The good news, if you can call it that, is that the tech industry has officially bottomed out. The bad news is that the industry is still a long way from full recovery.

"When you hit the wall that hard, it takes a while to get back up again," Gartner (NYSE: IT) senior vice president Al Case told the E-Commerce Times.

Jump-Starting a Comeback

The industry has seen a few false starts during the past year. But whether optimistic or pessimistic, analysts are not predicting a return to the heady days of corporate tech spending anytime soon.

"It's really going to take corporate executive confidence and some decent earnings announcements to jump-start a comeback," Case said.

A quiet recovery has already begun, with shallow gains giving hope to struggling tech companies. But analysts said they do not anticipate a significant upward trend in 2002.

"There is certainly more optimism now than [in] the third and fourth quarters of last year," Aberdeen Group senior vice president Hugh Bishop told the E-Commerce Times. "But people are not plunking down US$20 million for a new system. People are being much more judicious with their money."

Steps to Recovery

Almost everyone agrees that the tech industry will not sustain year-over-year double-digit growth as it did in the late 1990s. Nevertheless, the sector is making clear steps toward a more modest recovery.

Any recovery must start with economic growth. Corporate executives would be hard-pressed to commit money to technology in their upcoming 2003 budgets if the United States were to slip back into recession. Industry watchers are also looking for a couple of positive earnings quarters in 2003.

And while the economy is out of corporate America's control, executives will expect technology suppliers to demonstrate the value of their products from a business perspective before committing dollars.

"Clearly articulating the business advantage for your market as opposed to taking out flashy ads is going to be the name of the game," said Bishop. He added that general education about the long-term business value of a maturing infrastructure is also necessary to draw nervous investors back into the game.

Full Recovery

Combined, these factors should result in a growth rate of up to 5 percent in coming months, according to analysts, with a notable escalation in spending around mid-2003.

"There may be sectors that will spend faster than that," Case said. "PCs could pick up a little bit faster, and storage is going to continue to increase."

But the landscape has changed, with more enterprises adopting an application service provider (ASP) model instead of purchasing software. And analysts predict that an upswing in any single market segment will come at the expense of another segment.

So, while analysts are not predicting doom and gloom, they are not predicting another boom, either. Unless there is a new, massive killer technology on the horizon, a full market recovery is unlikely to become reality until 2004.