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How Will Fiscal Cliff Deal Affect the Tech Industry?

How Will Fiscal Cliff Deal Affect the Tech Industry?
By Jennifer LeClaire

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"Be aware that this is typically a very slow time of year for [technology] purchases because of the holiday bills, and this won't change that much," said analyst Rob Enderle. "However, continued uncertainty about the cuts to programs will make it hard for companies to put in place budgets to make strategic technology purchases."
 



The U.S. has averted the fiscal cliff crisis, but what does the deal mean for the technology industry? Although the tech bellwethers are so far silent on the implications of the new deal, we caught up with experts from various fields who are offering perspectives on what the tech industry can expect now.

Nick Hungerford, CEO of Nutmeg, an online personal investment manager, told us it will become harder for startup businesses to raise capital. He also expects a slowdown in the rate of innovation and an increase in the number of businesses that fail due to lack of capital.

"Technology products are often seen as luxury purchases. The fall in disposable income will likely lead to a slowdown in purchase demand and could lead to lower than expected sales of technology products," Hungerford said.

"As the final decisions over spending cuts and tax rises have been postponed, there is increased uncertainty regarding the economy. Technology companies will be less willing to embark on big research projects, to hire more staff and to launch new products as the country plays a wait-and-see game."

Aligning Tech Budgets

Rob Enderle, principal analyst at the Enderle Group, has a different take. He told us extensions on the tax breaks will make it more likely consumers will continue to purchase technology at the current rate.

"Be aware that this is typically a very slow time of year for these purchases because of the holiday bills, and this won't change that much. However, continued uncertainty about the cuts to programs will make it hard for companies to put in place budgets to make strategic technology purchases, particularly if they are closely aligned with government agencies," Enderle said.

"Government agencies, who don't know what their budgets will be yet, will be even more constrained, though some may use the 'use it or lose it' strategy prior to the second negotiation if allowed. Overall, the decision, such that it is, should be marginally positive for technology but not provide the clarity needed that the forgone 'big deal' might have provided."

Wall Street and Hiring

Peter Polachi, a partner at Polachi Access Executive Search, told us the biggest impact is going to be positive: The resolution removes short-term investor anxiety and allows the IPO window to stay open.

"Wall Street will love it, but not for long," he said. "But hiring in tech," he predicts, "will stay robust."

And fiscal leadership expert Gary W. Patterson, author of "Million Dollar Blind Spots: 20/20 Vision for Financial Growth," brings it right back to where we began. He told us to expect more fiscal cliff drama in the months ahead.

"Regardless of what Washington has done and will do this year, every business in America is going over a fiscal cliff," he said. "At a minimum, whatever basic risks you are taking knowingly or unknowingly," you have to ask, "what are the rest of your organization's million-dollar blind spots?"
 

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