Recession Expected to Hit Telecom in Second Half

Communications Equipment, Software to Absorb Biggest Impact

Bartels added: “And IT service purchases, which so far have defied the gravity of slow growth, will start to see little or no growth.”

That view was roundly echoed by other experts. They expect SMBs and enterprises to choose hosted services over equipment on premises, and they predict fewer companies will install cutting-edge technology such as unified communications. The jury was out on VoIP.

“I do think that voice infrastructure companies are going to feel more of a pinch simply because voice tends to have a long replacement cycle,” said Michael Ladam, a program manager with the Frost & Sullivan Stratecast telecommunications industry practice. For example, he said, “it’s going to be harder for a PBX vendor to say ROI will be strong because you’re talking about replacing equipment that is working just fine.”

Indeed, if companies aren’t going to invest in hardware, they’re not going to buy SIP trunks, said Hilton. However, he added, “I think the impact will be less for service providers, especially those that have a mobility play.”

Ed Vilandrie, co-founder and director of business and technology consultancy Altman Vilandrie & Co., added that fiber providers, carriers with their own transport and even entities such as data centers, stand to feel less pain than other industry players. That’s because they have infrastructure that clients need, and they can help customers reduce costs by making better use of the Internet and IP. “Middlemen,” on the other hand, such as resellers without their own facilities, are likely to struggle, Vilandrie said.

How Telecom Can Cope

‘Struggle’ might well be the flashing neon sign on the tech industry’s marquee for a while. To be sure, when giants like Google Inc. (GOOG) and Apple Inc. (AAPL) see their stocks take a nosedive (see table below), one wonders for how long the mighty might fall. But, then again, maybe it won’t be that bad for the tech sector. Yes, all parts of the tech industry will record fewer sales – some more than others – over the next year, if analysts are correct. Still, the upside is that the distressed assets in question these days aren’t in the communications vertical. That means new, or at least re-framed, tactics might help manufacturers and developers snag customers in hard times.

Source: Author Research

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