The outlook for corporate IT spending is gloomy, with growth expected to slow from 7 percent last year to 4 percent this year. The $500 billion that U.S. corporations spend every year on hardware and software accounts for about half of all capital outlays. While a belt-tightening might not be good for the IBMs, Dells, and Oracles of the world, Web 2.0 companies should do fine—even thrive. All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives.
Now is the time to win new converts. The pay-as-you-go pricing of Web-hosted software might have greater appeal to IT managers on a restricted budget. The software is cheaper upfront, and there is no hardware to buy or expensive IT workers to hire. The greatest cost of technology is maintaining it. Most Web 2.0 companies already know all this. Very few have their own data centers, and most have built their companies on inexpensive, open-source technologies.
The culture of frugality that is still worn as a badge of honor at many Web 2.0 startups will serve them well if (when) an IT-spending slowdown hits. Now, an advertising recession—that’s a different story (and a different post).