Technology is often painted as a relatively recession-proof sector, with some areas of business IT spend even running counter-cyclical to GDP growth trends. It can also help firms cut overheads and make productivity gains.
With the Bank of England warning this month that the UK will officially enter a recession in Q4 (and inflation yesterday hitting 10 per cent), which technology solutions and services are top channel partners betting on to keep their tills ringing through the tough times?
Will RPA, software optimisation and refurbished hardware all take off? And to what extent will spend on new devices and big refreshes dry up?
CRN caught up with 12 leaders of UK MSPs, resellers and IT services outfit to find out which tech they think will fly - and which will falter - over the next six to nine months…
Andy Wright
Chief revenue officer, XMA
Recession-fuelled technology tips: Task automation, service renewals, consumption models
In the danger zone: Client devices
What technology solution or service are you betting on to help customers in the event of a recession later this year?
I think it's important to note that when the Central Bank are predicting a recession is coming, it's because you are already in one and they just need the official tick in the box (two consecutive quarter of negative GDP growth) to call it a recession.
It's going to be more of the same if I am honest. Customer needs have already been driven by staff and skills shortages, plus rising costs driven by the supply side of the global economy and the impact of the 10 per cent swing, so any technology that can lead to increased productivity, effectiveness, and task automation are high on the customer shopping list. I also expect customers to be looking at how they extend the life of solutions, so basic support agreements and service renewals, though not sexy, may well be of interest.
Any technology that can lead to increased productivity, effectiveness, and task automation are high on the customer shopping list
Where customers are struggling for raw cash, clearly we expect pay as you go, consumption models to start to also become very popular.
Conversely, are there any technology areas where you are anticipating a spending crunch?
Demand for client devices has got to take a hit, partially because of the downturn from the heightened demand that the pandemic drove - meaning there are a lot of new devices out there. But also device costs are up by 20 to 25 per cent this year depending on device type. So that does not make you feel that this area will be unscathed.
How do you feel an economic downturn will play out for the UK IT channel more broadly?
I started working in the channel in 1991 when we were in the middle of a five-quarter recession. 2008 was also a five-quarter recession and then of course COVID drove a two-quarter recession, though clearly the impact of this was tempered by government intervention such as the Furlough scheme. All have been unique situations, so if you look at the early 90s the cost of money was high (base rate was about 14per cent) so cost of money became a limiting factor.
In terms of how business could react this time I think we are going to be in for a very bumpy ride as the shock to supply side has driven the economic outcomes. Labour shortages, plus oil being at over $100 a barrel and war in Ukraine are all driving inflation at the same time the fragile supply chain has driven elongated delivery of projects. Hence, why there will be pressure on the cash flows of some businesses. As we start to see the demand side of the economy adjust to those pressures, which it will, I think those businesses with weak balance sheets and working hand to mouth could find it very difficult to survive.
Which Microsoft partner is betting on Microsoft Teams and Viva to help customers through the recession? See next page...
