Tech Economy Shows Recovery

LAS VEGAS--The information technology industry may be descending from its heady flight of the late 1990s to following the general economy, but that isn't necessarily bad, according to a Comdex keynote address here by Carlos Bonilla, special assistant to U.S. President George W. Bush on the National Economic Council.

The ailing sector inevitably will recover as overall economic growth creates demand for new investments in hardware and software, Bonilla said. However, the huge tech investments that occurred between 1995 and 2000--which the government estimates amounted to about six or six and a half years of investment jammed into just five years--may drag down the industry's recovery, he said.

With the U.S. economy likely to show growth of more than 3 percent in 2002, a recovery is happening, although it may not look like it to some Americans, he said.

"It's hard to tell people that they have to live with diminished expectations, but when the point of reference is the bubble of the 1990s, there really is no alternative," Bonilla said.

Tech Eases Recovery

Capital investment overall, including in technology, is still falling even as the economy recovers. That's largely because so much new equipment is in use that doesn't need replacing, he said.

Most notable is the telecommunications industry, where "decades" of new long-distance fiber-optic capacity was built during the boom. However, even in that business, the market eventually will adjust, he said.

"There will be a price determined in the market where that capacity will come back into play," Bonilla said.

However, U.S. productivity is growing even faster than would be expected coming out of a recession, when layoffs lead to fewer workers doing the same amount of work. Technology deserves the thanks for at least part of that productivity gain, he said.

Downturn New to Tech

The recent trend of vendors trying to help customers do more with what they already have is only a return to what used to be the normal state of the tech industry before the boom. Then, services rather than new equipment sales dominated the business, Bonilla said in a discussion following the keynote.

Moreover, the downturn is helping to make the IT industry more mature, he added.

"This is a new industry that is just going through its first recession. It's a growth experience. ... It will be better situated for the next one," Bonilla said.

Asked for his view on the prediction by Brian Halla, National Semiconductor's chief executive, that the technology industry's recovery will begin on June 21, 2003, Bonilla quipped, "Well, I had thought June 27."

Attendees who heard the keynote said they remain wary about a potential recovery in the industry, but at least one welcomed a new focus on implementing technology to make basic business functions more efficient, rather than for its own sake.

"You've got to get back to basics," said John Leonowich, director of technology services at Mannington Mills, a flooring manufacturing company in Salem, New Jersey.