Article

CIOs bullish on post-election economy

Mark Brunelli, News Director

Ask three CIOs how they feel about the prospects for the U.S. economy given President George W. Bush's re-election, and they'll likely offer up three very "cautiously optimistic" answers.

IT executives and industry analysts said that they expect continued job growth and a robust economy during Bush's second term. But they also cautioned that unpredictable factors like the war in Iraq ultimately could lead to uncertainty in the marketplace and offset some of the economy's recent gains.

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Larry Davis, CIO of Sterne, Agee & Leach Group Inc., a medium-size retail brokerage house based in Birmingham, Ala., said that the only real cloud hanging over the economy right now surrounds the upcoming democratic elections in Iraq. The elections are scheduled for January, but some think instability in the country could derail those plans.

"If [the elections in Iraq] don't happen things will start to look bad there, then confidence becomes a problem and we go back into muddle," Davis said. "That is the other shoe, as it were."

Overall expectations for business and for the economy as a whole are quite good going forward. Davis said he thinks this will continue even if interest rates continue to rise, which generally amounts to bad news for the bond market.

"Usually when the bond market gets depressed because of a hot economy, the stock market goes up and they offset each other, and that is the reason you have multiple strings on your boat," Davis said.

Davis predicts that the improving economy will lead to new IT spending, but probably not right away. Many companies -- especially those in the financial services sector -- are still taking a wait-and-see approach with regards to the Iraq situation. Many are also eagerly awaiting the results of the Christmas shopping season to gauge consumer confidence, he said.

"Part of the new IT spending will be catch-up and part of it will just come along with some impetus from Congress to get things moving and to push new jobs and things," Davis said.

Mitch Myers, vice president of operations for medium-sized manufacturer FWMurphy in Tulsa, Okla., said that his company set new sales records over the past year. He and other company executives expect this trend to continue, and say it would have even if Mr. Bush had lost the election.

It is in the area of offshore outsourcing that Myers believes the president will have the most impact. Bush's policies are seen as friendly to the outsourcing trend, whereas his challenger in the election, Sen. John F. Kerry, had promised to make it harder for companies to go overseas.

Myers said that more companies, including his own, will likely begin looking into offshore outsourcing now that the election results are known.

"I'm not one who would tell you that I believe that the President of the United States has a huge impact on the economy," Myers said. "But I think [the economy] is on the trend upwards and I think it's going to continue upwards."

Cathy Hotka, principal at Cathy Hotka & Associates, a retail IT consultancy in Washington, said that the CIOs she deals with were pleased to see their companies' stock prices rally following the election.

But those same CIOs are also concerned about possible sourcing problems that may arise as a result of war in Iraq and other foreign policy issues.

"There will be continued uncertainty about international relations," said Hotka, who also serves as head of the CIO Council for the Retail Industry Leaders Association. "This president is all about uncertainty."

Despite the growing economy, IT executives will continue being conservative with their IT spending, according to Barbara Gomolski, a research vice president and analyst with Stamford, Conn.-based Gartner Inc.

The analyst explained that one of the reasons for slow IT spending is the fact that many companies are over-subscribed to technology right now and are getting by with systems they bought during the late 90s, before the dot com bubble burst. Another reason is the lack of compelling new technologies, or "killer apps," that businesses simply can't do without.

"Regardless of who won the presidency, from an IT perspective, it's still a very incremental and slow crawl back to health," she said.


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