The R word has permeated the business lexicon. With the nation's economy slip-sliding into a recession that some think will last for quite a while, small and midsize businesses find themselves making various adjustments. While many had been focused on expanding their reach, the emphasis now is on scaling back deployments and closing offices, and the repercussions from this shift in thinking are being seen in the networking space.
Increasingly, corporate networks are shrinking. Market research firm Vertical Systems Group found that the number of companies disconnecting network locations reached its highest level in six years in 2008. Fourteen percent of companies reported that they eliminated one or more network locations without adding or moving others during the year. That number was up sharply from 2007's figure of 9 percent shutting down some sites. While a few industries, such as retail and financial, were particularly hard hit, downsizing appears to be in vogue in just about every business sector. With many businesses bracing themselves for an extended downturn, more of the same is expected in 2009.
As a result, budget cuts are either looming or already being implemented. Businesses that had been freely increasing their network purchases will be less inclined to spend, and the fallout from that shift will be evident in a couple of areas.
Small and midsize business IT staffs will need to hunker down. With the reduction in the number of locations will come a reduction in personnel needs. Therefore, management will probably be trying to reduce head count, so network managers will need to protect themselves.
However not all IT sectors will suffer. During cutbacks, companies often turn to third parties as they opt for more contract work and less full-time help. Consequently, some internal operations could be funneled to resellers, outsourcers, and SaaS service providers. If an IT executive had ever dreamed about how it might feel working on the other side of the street, now may be a good time to make that switch.
In addition, corporations will spend less on their network infrastructure. In some cases, they will delay migrating from higher-speed connections, so employees may have to wait a few minutes longer to download needed information.
Recently, the network industry's focus shifted to mobile communications. Many suppliers had been pointing to 2009 as the year when adoption of high-speed 802.11n wireless connections would occur. While that area may generate increased sales, its growth may not come as quickly as some had anticipated.
VoIP and unified communications could be another growing area impacted by the cutbacks. Many organizations have been slowly rolling out VoIP connections because the technology enables them to reduce their telecommunications costs. Now that they have that infrastructure in place, they were looking for ways to use it to increase productivity. Consequently, interest in unified communications had been rising. However, this area had been stuck in a chicken-or-egg phase: Vendors charged premium prices for these products because few companies had implemented them, and the high prices kept many small and midsize businesses from deploying them. Recently, suppliers had become creative in marketing these applications. They have been bundling the cost into hardware purchases, maintenance costs, and upgrade contracts. Customers can expect to see more of those options, which could help them justify unified communication deployments.
As companies close up remote locations, they will be saddled with unneeded network equipment, such as routers and switches. Consequently, used equipment suppliers could find themselves with a flood of new inventory. This represents good news for those companies whose plans have not been as severely impacted by the economy. They should be able to find some very good deals as a variety of outlets vie for their business. Vertical Systems found that 16 percent of companies plan to add new locations to their networks in 2009. So during this recession, the rich will get richer -- once again.
See more columns by Paul Korzeniowski.
Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.