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That was the sobering message from Charlie Giancarlo (left), formerly of Cisco and now chief executive of Avaya, when I saw him earlier today.
There have already been signs that corporate spending - the main engine that still drives the tech industry, even if the rise of the consumer has been the story of the last five years - has been weakening. Cisco, whose quarter ends a month later than most others, said last week that customer orders in October dropped by 9 per cent compared with a year before.
According to Giancarlo, though, these still count as the good times. His reasoning: “IT departments are spending as much as they can this quarter, because they know it’s going to dry up next year.” And while they won’t get any personal benefit from saving money now, CIOs know they will certainly be blamed if they can’t keep up with their users’ needs next year.
He bases his judgment largely on the experience of 2000. Cisco, his employer back then, did fine in November. As usual, corporate customers completed their next annual budgets in early December, and the impact on demand was almost instantaneous: “In the second or third week of December, it fell through the floor.”
This view is not shared universally. When I put the same question recently to Steve Mills, who runs IBM’s software business, he was dismissive of the idea that IT chiefs were spending now while they still could.
We’ll see. The Giancarlo scenario goes like this. There’s a sudden retreat by customers around the turn of the year as companies simply cut off all spending, and tech companies have no real insight into their customers’ intentions. That is the moment of maximum fear and uncertainty. Over the next few weeks, the fog clears a little as the salesforces of the tech suppliers spend time with their customers and come to understand how the budgets really look for 2009. By early Spring, some spending resumes and it becomes possible to plan for the rest of the year.
The bad news: that will probably mean another round of cost-cutting and job losses at that stage, as tech companies adjust to meet the new expected level of demand.
David Gelles, Joseph Menn, Chris Nuttall and Richard Waters in the FT's San Francisco bureau upload their views - plus tech insights from writers in New York, London and Tokyo
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