Tech firms eager to gobble stimulus funds

The biggest federal public works project since World War II offers tantalizing possibilities for the struggling tech market.

President Obama's staggering $787 billion economic stimulus package, passed in February, could be a financial oasis — especially for an industry facing a precipitous drop in tech spending by economically ravaged corporations and consumers.

It allocates tens of billions of dollars for tech upgrades to energy ($4.5 billion for smart grids), health care ($20 billion for electronic medical records), broadband deployment and education.

The dizzying amounts have tech giants jockeying to land government contracts, the first expected to be awarded in the next few weeks. IBM ibm, General Electric ge, Cisco Systems csco, Intel intc and some well-positioned start-ups are among suitors poised to capitalize.

"This is a once-in-a-lifetime deal," says Sean Maloney, chief sales and marketing officer at Intel, which is working on broadband projects with governments in the U.S., Japan, Vietnam and others. "This dwarfs the Marshall Plan and the New Deal. It is unimaginably large, and will never happen again. It is incumbent on us to spend it wisely."

Adds Cisco CEO John Chambers, "I think technology can transform health care, can transform education, can transform the environment — not just from smart grids or better utilization of data centers, but also change our lives in a positive way."

IBM, GE and Cisco are expected to reap financial rewards because of their expertise in IT infrastructure. The largesse will assuredly filter to third-party tech partners that work with IBM and Intel, and to small businesses. Intuit CEO Brad Smith notes the stimulus plan is designed to free up credit for small businesses and stimulate start-ups.

"It takes more than one company to innovate the economy and fix systems in need of repair," says Teresa Carlson, vice president of Microsoft Federal, which works with federal agencies, the Defense department and the intelligence community.

Jobs, jobs, jobs

A $30 billion stimulus investment in health care IT, broadband expansion and intelligent utility grids could produce nearly 1 million new jobs within a year, according to research by IBM and think tank Information Technology & Innovation Foundation.

IBM's services unit, for example, could benefit financially from the initiatives, but the analysis said most jobs would go to small businesses. "IBM and GE are all over this," says Andrew Bartels, an analyst at Forrester Research.

Bartels estimates about $70 billion of the projects have a tech element, with about $28 billion up for grabs in IT contracts in 2009-10. The stimulus will generate more than $100 billion in tech spending in the next five years, market researcher IDC predicts.

Some consumer activists fear, however, that a good chunk of federal contracts will go to a small pool of companies such as IBM and Cisco, blunting long-term innovation at the expense of job creation and economic expansion.

Another concern is who will oversee or regulate how the money is spent, says Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer advocacy group. "We live in the age of AIG. It is a legitimate concern where money is going."

While any tech spending is welcome, it could be offset by a 3% annual decline in IT spending, to $537 billion this year, according to Forrester Research.

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