Issue link: http://cp.revolio.com/i/611691
www.datacenterjournal.com 8 | THE DATA CENTER JOURNAL teCh-BuBBle talk o pinions on the existence of a tech bubble run the gamut, with some predicting a dot-com-style crash and others claiming that the market is woefully undervalued. Judging from stock prices, the market has made a roaring comeback, with the Nas- daq index having finally pushed past its dot-com peak of just over 5,000. Although in constant-currency terms that index still actually lags because of inflation, its climb—particularly since the Great Reces- sion—has been astounding. A trend fueling speculation that the market is in a bubble is the growing num- ber of "unicorns": tech startups (public or private) whose valuations exceed $1 billion. e critical question is whether the proliferation of highly valued startups represents a market with growing demand or a mania among yield-starved investors looking for a return on their capital. Some, such as venture capitalist Marc Andrees- sen, believe technology is undervalued and has been since the year 2000. But to others, such a view seems dubious in light of macroeconomic conditions such as a decades-low labor-force participation rate, falling money velocity, rising debt and the absence of structural reforms following the Great Recession. Unfortunately, identify- ing a true bubble is best done in hindsight. strong Dollar hits gloBal it sPenDing Technology-research firm Gartner is predicting a 5.5% drop in worldwide IT spending for 2015 to about $3.5 trillion. For context, it estimated in mid-2009 that IT spending for 2008 was about $3.35 tril- lion. at's less than 5% growth in seven years, or a compound annual growth rate (CAGR) of less than half a percent. Compared with stock prices, this increase is lackluster at best. Ameliorating this precipitous de- cline, however, is world currency dynam- ics. Gartner blames the decline on the strong U.S. dollar; according to its calcula- tions, the market will actually grow 2.5% in constant-currency terms. On the other hand, the relative stagnation of spending in a market that is such an important part of business everywhere raises a number of concerns, particularly in light of stock prices and company valuations (the aforementioned unicorns, for instance). Also, the rising strength of the dollar—the currency of a nation whose fiscal situation is precarious at best—suggests that more may be going on underneath than would warrant a simple constant-currency dis- counting of the decline. Again, however, such things are best analyzed in hindsight. One technical factor that may come into play is the decline of Moore's Law. As chip costs per transistor level out from their historic decline, IT spending should see some effects. Such factors could either reverse or cement the IT spending decline that Gartner is forecasting, depending of course on the interplay with the broader economy, other technology develop- ments and companies' willingness to shell out more money for processing-power improvements than they may be accus- tomed to. CollaPsing oil PriCe e price of oil plummeted in late 2014 and, despite some apparent leveling in early 2015, has continued to fall to Great Recession levels. Although oil may not be directly relevant to IT (except in emergen- cies when data center operators fire up the diesel generators), its precipitous decline raises questions about the broader econ- omy as well as the price of energy. Since 2000, energy consumption in the U.S. has stagnated or even declined slightly accord- ing to the Energy Information Administra- tion. Per capita, it has fallen rather sharply. e question, then, is why an economy so linked to energy would be seeing a drop in demand—particularly when data centers are so demonized for their growing portion of that demand. Naturally, energy efficiency plays some role. e amount of energy required to generate a dollar of gross domestic product (GDP) has declined rather steadi- ly since at least the 1940s. But the stagna- tion or slight decline in consumption since about 2000 is curious. Identifying a clear trend, however, may require a few more years of data; for instance, greater context may help better identify the scope of a possible economic slowdown. As for the price of oil, its decline may herald efforts to raise energy taxes or impose regulations that, at $40 per barrel, seem much less onerous than at $140 per barrel. Data center operators in particular should be wary whenever politicians begin spouting about energy: usually, that means higher costs and a greater compliance burden are in the offing. stoCk BuyBaCks All things being equal, prices rise when supply drops. If you're a technol- Technology-research firm Gartner is predicting a 5.5% drop in worldwide IT spending for 2015 to about $3.5 trillion. For context, it estimated in mid-2009 that IT spending for 2008 was about $3.35 trillion. That's less than 5% growth in seven years, or a compound annual growth rate (CAGR) of less than half a percent.