Financials Hurting Wall Street; Small Business Tech Spending on the Rise

Brian.oco 0 Tallied Votes 148 Views Share

Markets are down about 50 points in mid-afternoon trading on Tuesday, mostly due to investor worries about continued woes in the financial services sector. In short, nobody is buying the notion put forward by Wall Street optimists that the credit crunch – now one-year-old – is coming to an end.

It's a slow process. Like a virus that works its way through your system, the credit crisis has already ravaged sub-rime mortgage loans, Alt-A loans (where mortgage holders don’t have to pay the principle borrowed every month) and are now focusing on prime loans, especially in hard hit home mortgage markets like Las Vegas, San Francisco, and Miami. Prime loan foreclosures are way up nationally, with one-third of new homeowners since 2005 burdened with mortgages where they owe more than the value of their homes.

Again, this is only high stress areas – most of the country hasn’t shared the home value misery of Californians, for example. But with prime loans in increasing trouble, banks and lenders are pulling way back on issuing homes loans, thereby crimping the mortgage market even more.

Look for auto and credit card loan problems to creep up next.

In tech news today, some good news in a report issued by Compass Intelligence on business technology spending trends. Spending will be solid but companies are also looking for ways to cut costs and get the most out of their tech investing dollar (big surprise there). Overall, small and midsized business will spend $280 billion in technology spending by 2012. In 2008, such firms are expected to spend about $688 million on new technology spending. The fastest growing areas for spending include hosted services, wireless and networking technologies.

The economy is keeping a bit of a lid on spending but companies still want to spend on new technologies to grow their businesses. I take that as good news. "America is facing very serious economic conditions, which will not change overnight," said Kneko Burney, president and CEO of Compass Intelligence, in a prepared statement. "This means that businesses large and small will need to become more efficient and innovate if they are to survive the current crunch."

According to Compass, businesses with five to 99 employees will represent 32% of information and communications technology spending this year alone. The Compass report, entitled "Economy 2.0: New Challenges & Opportunities in Business ICT Spending," predicts that small and midsized firms will increase their ICT spending by 6% to 8% annually through 2012. “Those firms could present communication technology vendors with the most opportunity for revenue growth since they are expected to increase ICT spending the fastest,” the report says.

The need for businesses to latch on to new technologies should be enough to keep growth surging forward, although at a slower pace. But the money is on the table and that should be enough to keep tech companies on solid financial footing. "Leveraging new technologies, particularly Web 2.0, where business customers leverage the Internet in new and creative ways to connect with their partners and customers, will drive business IT spending for the next couple years, with the greatest impacts being felt in the small business market," Burney adds. "Beyond 2009, I expect to see the emergence of 'Web 3.0' for commercial businesses, where firms will use a combination of social networking, content and contact management, and e-commerce to generate new revenue, while improving the overall customer experience."