IBM’s disaster scenario still has good news for tech
Imagine being privileged enough to work in an industry where a fall in GDP or a short recession has little to no effect on your business. Many people would love to be so lucky. And we’re not talking about one of those sectors that you would assume to be completely bulletproof because it caters to that strata of the super-rich who are rarely, if ever, affected by economic downturns. You know, like the companies who make high-end luxury items, super-yachts and the like. No, we’re not talking about them. We’re talking about you.
I can appreciate that some of you might have some questions at this point but I’m merely extrapolating from something said by the leader of one of the most illustrious and venerable technology companies there is. The statement I’m referring to was highlighted in a story on the CRN website concerning IBM’s first quarter results.
Apparently, in an earnings call with analysts, IBM CEO Arvind Krishna stated: “We think and we believe – and the past couple of quarters have borne this out – that demand for technology is going to stay four or five points above GDP. Even if GDP falls too flat, or there’s a quick recession or if it’s a very slight recession, we see demand staying strong and continuing.”
Admittedly, he qualified that dose of optimism slightly. “Now, I’ll acknowledge if we have something much more catastrophic, that’s different,” he added. To be fair, it would be different for nearly everybody in that scenario.
Just in case people started to feel anxious about the likelihood of a potential catastrophe (yeah, like that will ever happen), Krishna reassured analysts that “for all the scenarios that we do outline and we do look at, we see that demand is going to continue in a growth phase for the foreseeable future”.
So, there you go. It’s hard to grumble with a scenario where demand for technology is predicted to stay four or five points above GDP.
Krishna’s comments lend some perspective to the fairly rosy view of the PC market presented by Canalys despite the first year-on-year shipment decline in two years. While shipments of notebooks and PCs were down 3%, revenue rose by over 15% “as prices continued to rise in a supply-starved market and consumers’ appetite for costlier PCs kept increasing”.
Commenting on the figures, principal analyst Rushabh Doshi said vendors had “reason to cheer as the PC industry’s revenue growth streak continued”. He noted there had been a significant expansion in the installed base since 2019 with more than 150 million notebooks and desktops added.
“Even if customers are forced to delay purchases due to rising prices in the short term, a large wave of device refresh is inevitable,” Doshi argued, “especially given that more than 50% of active devices are more than four years old.”
In a separate note, Canalys CEO Steve Brazier noted that despite a number of headwinds, especially the war in Ukraine and the effects of economic factors on consumer sentiment, demand for commercial PCs is expected to stay strong as people return to the office.
“Many enterprises have increased their PC budgets because staff retention is their biggest challenge,” he wrote, “and the cost of a PC is still far lower than the price of searching for a new member of staff.”
‘If you want to keep your staff, buy better PCs’ is an interesting addition to the arguments for why PC demand will remain strong in the future. It’s a positive argument too because many businesses will be happy if technology can help them retain staff for longer. Quite how much better or newer they need to be is a topic for another day, but it’s worth bearing in mind that there is a potential environmental penalty from a company changing PCs more frequently to keep its employees happy.
With so much focus shifting to environmental issues, it may become a source of angst in the future as employees grapple with the choice between having a better PC or a more sustainable IT policy. At a wider level, working in an industry four or five points ahead of GDP may not be quite as commendable as it first appears if it creates additional costs for the environment.