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It's the Economy, Stupid - AvNetwork.com

It's the Economy, Stupid

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Another year ends; anew we begin. A time for parties, resolutions and, of course, predictions. So from an office in a small suburb of Chicago, Illinois, USA, I here advance my thoughts on the direction of North American digital communications industry for 2008.

Year after year, we hear that same old self-serving song: “next year is the tipping point” for adoption and deployment of digital communication networks. I am not myself sure that I know what a tipping point is, having never seen one. And, I note, with a degree of skepticism, that the majority of these choral members are industry vendors. Yet the question remains: what will happen in 2008 in the DCN industry?
For starters, we here at PRI are extremely busy. Going into 2008, we have a huge backlog of very cool global projects for some major enterprise players. Most of the knowledgeable industry folks that we talk to are similarly busy, be it proposing to prospects, deploying networks, raising capital, or buying companies. We note a similar robust level of activity in Europe, parts of the Middle East, and, of course, China.

Returning to the specific question of opportunities in North America, industries such as financial, medical, and OOH are busy. Government applications are, for the most part, dead. The largest sector prospect, and historically the slowest to adopt is, of course, retail. And while we generally see an increased level of retail activity, many projects are still in the early stages of investigation. Sectors such as supermarket, telecom, and gas stations are busy. Department stores, mass, specialty retail, auto dealers, chain-drug, c-stores, and QSR are slower (with some notable exceptions) to adopt.

While we believe that the above-noted busy sectors will remain so throughout 2008, we also are of the opinion that the slower adopting retail sectors will not break out until at least late in 2008. Our reasoning for this is that as the U.S. economy enters into a mild-recession, which will last for at least the first two quarters of 2008; many retailers will be less inclined to invest in what many of them now view as a non-core, at-retail marketing activity. By the time the economy starts to perk up in mid-2008, retail DCN projects won’t be materializing until 2009. Financial institutions, medical, and OOH, where DCN is either a fundamental component of their marketing strategy or business, will and must invest in DCN. For most retailers, however, such an investment is, for now, still perceived as a non-essential investment. Thus, as the economy declines and retail sales and profits slow, such investments will be further postponed.

All is not lost, however. Longer-term, retail network successes are starting to outnumber the failures. In time, such an investment will be viewed as core to a retailer’s business. But for much of 2008, the bulk of activity in the DCN industry will continue to occur in non-traditional retail segments, as well as overseas.

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