By Natasha Lomas
Wednesday, October 29 2008 11:08 AM
URL: http://www.zdnetasia.com/news/business/0,39044229,62047708,00.htm

The economic downturn is not universally bad news for IT, according to consulting company Frost & Sullivan which says gloomy markets can actually mean good news for certain segments of the tech industry.

As economic uncertainty deepens there is renewed business focus on cost-cutting which can be a boon to IT, according to Andrew Milroy, ICT director at Frost & Sullivan. He identified four technologies and service areas likely to experience increased demand in the current climate: sustainable IT; outsourcing services, managed and hosted services; information management tools; and services that support mergers and acquisitions.

In a report called ICT Opportunities in an Economic Downturn, Frost & Sullivan predicts belt-tightening will increase investment in sustainable technology initiatives--such as virtualization, videoconferencing, thin clients and power consumption modeling--as they are able to lower costs as well as boost green credentials.

It said a recent survey of organizations in Australia indicated 90 percent have or are in the process of introducing sustainability initiatives within their ICT infrastructure.

The consultancy also predicts good times ahead for software as a service (SaaS) as it says tighter controls and a desire to minimize risks will increase focus on variable costs--leading to greater interest in SaaS and hosted service models.

Other areas that could potentially do well in a downturn are transactions via mobile phones, electronic billing services and self-service systems such as branchless banking, according to the consultancy, along with traditional and non-traditional areas of managed services such as managed handsets, network services and leasing services.

Milroy said in a statement: "In particular, ICT solutions that shift costs from a capital to variable component, focus on productivity increases and cost reduction, and support organizational restructuring and acquisitions are likely to see growing demand."

Frost & Sullivan also believes demand for IT outsourcing will ramp up but says offshore organizations are likely to reap the biggest benefit as they can be most competitive on costs. Contract terms for deals, however, will probably fall significantly.

Other areas that could do well include CRM (customer relationship management) and business intelligence as Frost & Sullivan said they offer opportunities to increase productivity through improved data management.

The consultancy added that the economic slowdown may trigger a rise in mergers and acquisitions--which could create significant opportunities for IT consulting and systems integration organizations.

Natasha Lomas of Silicon.com reported from London.