I was going to write about 10 CIO new years resolutions, that will come latter, but this thought rolled through as I was reading the paper.
According to the Wall Street Journal, U.S. companies have accumulated a mountain of cash and look to invest it in 2011 — Big Firms Poised to Spend Again. That is good news for the economy and perhaps the unheard of will happen as corporate investment pulls the economy forward. That was something I mentioned in a blog post back in May 2009. According to the WSJ, companies like Corning, Illinois Tool Works and others are or have already put that cash to use, primarily in R&D areas and hiring engineers.
According to the WSJ article, IT companies have amassed more than $350 billion dollars in Cash and equivalents more than any other industry and almost twice as much as the Healthcare which had a reported Cash balance of around $180 billion.
NOTE: The rest of this post reflects the author’s personal observation and ideas. It does not reflect Gartner’s opinion or position.
While tech companies have earned much of this cash through cost cutting, consolidation and efficiency gains, much of this came from you in terms of purchases and maintenance fees, etc. Without you there would be no cash to hoard and now to invest.
The question is this, what are tech companies going to do with all of this cash?
In a related WSJ article, December 27th’s Heard on the Street article “Down in Silicon Valley, Some like IT Hot”, Rolfe Winkler indicates that a lot of that cash may be going to fund industry consolidation via continued M&A activity. The article points out that “in their question for growth, these vendors now want to gobble up as much of their client’s IT budget as possible.” I thought that our budgets existed to create business value. They are not a fully dressed turkey waiting to be consumed by our technology partners.
Gartner envisions this in its 2011 Predicts Publication describing consolidation leading to the rise of “Super vendors.”
Consolidation, integration and hopefully innovation can all come from investing cash. How are we, the customers of these companies going to influence those decisions, make our needs heard and have our say in the evolving technical landscape? After all, our budgets provide the revenues that are the source of their cash. How will that serve us? Our companies? Our future?
In November 2009, Alan Matula, the Global CIO at Royal Dutch Shell, spoke at Gartner’s Symposium in Cannes. There he made the following comment (I paraphrase) “There was a time when CIOs shaped what technology companies provided, we told them what we needed and they worked with us to build it. We are now in a period where we sit back and receive what technology companies are giving us. Its time that we went back to being more vocal and proactively driving technology innovations.”
While the statement was made in the past, I think that its intent and spirit are more relevant now than every before. We face a transition from heavy, owner operated IT solutions to lighter weight Internet based services. This is a transformation of service, financial and revenue models that will disrupt the IT industry and require CIOs to reimagine IT.
We faced this type of environment before and CIOs were rather vocal at the start of the Client/Server – Internet 1.0 revolution. The result was tremendous creativity and innovation. There was also disruption, but without a doubt, there were also but greater strategic and operational opportunities for IT.
So, what will tech firms do with the $350 billion dollars in cash?
I do not know, nor can I say. However, I may be time you let your technology partners know what you think and what you will need in the future.
NOTE: This post reflects the author’s personal observation and ideas. IT does not reflect Gartner’s opinion or position.