The global economy seems to be teetering on the edge of an abyss. After years of double-digit growth, it has ground to a sudden halt and the perceived engine of the past decade of growth, IT, seems to be the cause.

A day does not pass without a major software, chip or hardware corporation posting massive drops in profits, cutting jobs and predicting a gloomy outlook for future earnings.

The long boom may be over and it seems that doubts are being cast over the nature of the boom itself. The received wisdom that it was an IT productivity-led phenomenon is now being seriously questioned, as it all seems to have been down to the combination of the availability of cheap oil and low interest rates.

There are two opposing views on where the IT market is going and this will have a bearing on the global economy itself. The house of cards on which the economic boom was built is collapsing. A domino effect that started with the bursting of the dotcom bubble is spilling over to the general IT market (especially chip manufacturers and, increasingly, software providers) and further still into the general economy.

We have all witnessed the dramatic slide in the Nasdaq and in tech shares across Europe, as well as the general effects of the US slowdown on the Dow and FTSE 100.

Some believe it is the delayed effects of the discretionary spend associated with Year 2000, when organisations took the opportunity to upgrade hardware and take advantage of the Year 2000 umbrella to carry out non-Year 2000 development.

Others believe it is more serious; we are now in the midst of a period of economic contraction. This is especially true of the telecoms market, which seems to be saturated with bandwidth that no one wants to use. And, although Britain and continental Europe believed they were immune from the effects from the US downturn, there is increasing evidence that this is not the case as Germany sees its growth rates diminish and unemployment rise again, and the rest of Europe struggles to react.

The double-digit growth over the past six years in states such as the Republic was ultimately unsustainable as economies reached their natural limits, especially in relation to the availability of skilled resources. The issue of recruiting and retaining skilled personnel was beginning to hurt the ability of organisations to compete.

A return to more realistic growth would not be a bad thing. And some contraction is not necessarily a bad thing. The effects on the Republic, for example, will be a cooling off and bring a reduction in inflationary pressures, which has been an issue for the European Central Bank for some time.

Furthermore, we should remember that the majority of organisations are now so IT-dependent that they cannot switch off spending altogether and will, at some point in the future, return to their familiar IT spending habits.

In some quarters the IT market is holding up. For example, SAP is weathering the storm much better than most, as is Logica. But before we get too excited, these are the exceptions rather than the norm. Ultimately, after a period of retraction, the pent-up demand for IT and new systems will probably lead to renewed growth. As yet, however, we do not know when this will be.

Central banks are cutting interest rates aggressively as recessionary pressures loom much larger than inflationary ones. Organisations are doing their part by reducing inventories, stopping investment projects and cutting headcount.

But, if we are to believe that IT holds the key, the smarter organisations should be adopting two strategies. They should be maintaining investment in their strategic IT projects, and they should manage the process through which they deliver and manage their technology more carefully.

This strategy will ensure that, when the global economy rises out of its slow growth, they will be in a strong position. It will not be easy for some - it will mean not seeking the latest technological fad without regard to the genuine business need. It will also mean seeking to improve value from their existing IT infrastructures and systems.

Dr John Ryan is a management consultant with Davis Langdon Consultancy; Andrew Holmes is director of operational risk services at PricewaterhouseCoopers