Blackouts hit IT spend

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 24 Jan 2008

The ongoing electricity supply crisis will affect this year's IT spending, with funds allocated for hardware, software and services diverted to generators and uninterruptible power supplies (UPS), say analysts. But it is not a universal view.

"The investment in these items of equipment will come out of the IT budget and will thus influence IT spend on other products," says IDC PC Group Southern Africa research analyst Hannes Fourie.

The South African software, hardware and service market has been growing at a compound average rate of 8% a year, says Global Research Partners director Paul Booth, with 2008 spend expected to top R60 billion.

Frost & Sullivan ICT analyst Karin Howell agrees with Fourie that the "power crisis will most certainly affect IT expenditure for 2008".

"Industries where continuity is of critical importance would have already invested in UPS technology; nevertheless, we still predict an increase in general UPS sales," she says. "Since the power situation is unlikely to improve before 2012, we expect a massive boom in generator sales, both for residential and commercial use."

Fourie says the expectation was that there would be significant infrastructure investments this year and next "partly due to outdated technology and preparation for the 2010 Soccer World Cup".

Booth and Frost & Sullivan African ICT analyst Corrie Froehlich take a contrary view. "Due to the large expansion projects planned for 2010, for example the Gautrain, and the associated demand coming with other big infrastructure projects for IT equipment, Frost & Sullivan does not believe that IT companies will hold back on spending.

"Companies are already executing their IT strategies to position themselves for the future and will not hold back due to electricity problems. If there is a will from government to solve the power crisis, it can be solved, and all citizens are relying on government to solve it as quickly as possible," he says.

"Only history will really tell us if this is a 'tech refresh' year," Froehlich adds. "Time will tell. I think IT spend will continue and companies are still renewing systems due to healthy profits made from the last few years and new big infrastructure projects continuing. But recession has crept in on the US, which will also affect SA."

Booth adds that he does not expect UPS and generator funds to come out of the IT budget. He says most enterprise IT departments have long used UPS and have generators in place. If the rest of the business must now spend on this equipment, it is for their account, not for IT's. Small and medium business may spend IT money on UPS and generators but this, Booth says, will not impact substantially on the R60 billion-plus he expects to be spent on IT proper this year.

Other consequences

One change the analysts do expect is a switch from desktops to laptops, especially in small and medium business. With a battery that lasts between one and several hours, laptops allow small companies to avoid purchasing a generator and/or UPS system.

"Companies that focus on efficiency and productivity will rather invest in notebooks than desktops as the power outages will justify the spend," Fourie says. "This will further drive notebook adoption in the country, especially in smaller businesses. Larger companies have generators and UPSes in place so notebook investments should not be as aggressive as in the smaller businesses," he says.

The analysts also expect companies to spend more on maintenance as outages damage hardware and corrupt software. "Servers will be damaged by the outages as this technology is not meant to be switched on and off repeatedly," says Fourie. "This will compel investment in UPS technology."

Howell says the increase in power outages means downtime is increased. "Electronic equipment lifetime may be reduced due to the expanding and contracting of electrical circuit boards and solder joints," Howell says, meaning equipment will have to be replaced earlier - a further unexpected cost to business.