Software // Information Management
Commentary
10/22/2008
09:40 AM
Rajan Chandras
Rajan Chandras
Commentary
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Tech Execs Predict Resilience in a Recession

Reuters reports that technology executives don't expect the current slowdown to impact them as badly as the bursting of the tech bubble in 2000. That sounds reasonable, because there are fundamentally different reasons for the slowdown then and now, even from a purely technology perspective.

Reuters reports that technology executives don't expect the current slowdown to impact them as badly as the bursting of the tech bubble in 2000. That sounds reasonable, because there are fundamentally different reasons for the slowdown then and now, even from a purely technology perspective.

During the 2000/2001 technology bust, the main culprit was… technology. Technology executives, product vendors and service providers all first bought into, then actively propagated, the erroneous and simple-minded formula "More + Faster = Better & Easier." Throw in as much technology and services as possible as quickly as possible, and the results are almost guaranteed-cost be damned. That was the Generally Accepted Absurd Panacea of the day. Technology vendors and service providers salivated at the easy sales and high margins; on the other side of the table, IT executives not only bought into the madness, they whole-heartedly supported and propagated it. CIO's and CEO's swooned over terms like "B2B/B2C," "first mover's advantage," and "24x7." Businesses and venture capitalists fell over themselves in their eagerness to fund these exciting new opportunities.Then came the bust.

Businesses soon (but not soon enough) realized that there was no pot of gold at the end of this expensive, multi-hued technology rainbow. In hindsight, the reasons for the bust were simple, yet potent: • Setting up a Web site wasn't too hard, but setting up the back-end operations (the complexities of the REAL business) was another story. • Customers just didn't line up as expected; and when they did, it was transient, like customers stopping by at an exhibition booth.

The epitome of the excesses and unrealism (is that a word?) of the times is the meteoric rise and flaming failure of the much ballyhooed WebVan.com. Founded/supported by names like Louis Borders (founder of Borders book stores), Goldman Sachs and Yahoo, WebVan was led by George Shaheen, then CEO of Andersen Consulting, who was brought in for what was described as an "oversize grocery cart of stock-option wealth." Shaheen kicked his high-profile job at Andersen Consulting and essentially walked into the complexities of the grocery business like someone swaggering confidently into an oncoming train - with very similar results (see first bullet point above).

Two years later, with WebVan tottering on the brink of failure, Shaheen was shown the door, yet, despite a resounding failure to implement the WebVan business model and reward those that trusted his business acumen, Shaheen was unrepentant: "I have a track record, and I've had a good career, but I don't care what anybody thinks about it. I did the job, and the bottom fell out of the industry, and that's all there is to print."

Things are different this time.

True, there has been "irrational exhuberance" (read "shameless greed") this time as well, but it was wrought in the housing market by borrowers, lenders and money managers, fueled by ultra-low mortgage rates and a general feeling of euphoria. Was technology a contributor to the mess? Undoubtedly, but only in the form of a tool used by the greedy, and not as the genesis or antecedent of the greed, as it was in 2000/2001. Just as technology has been an unwitting contributor to the current problems, technology will also contribute to resolving the problems - if used wisely by the now (presumably) wiser decision-makers.

It is perhaps an unstated recognition of this difference in the Reuters report; an implicit acknowledgement that technology investments are relatively resilient to changing economic conditions, because technology is the enabler of not just business expansion, but also of business conservatism and thrift. Need to expand into new product lines and new markets? You need technology to carry the business. Need to reduce expenditure without an equal reduction in market effectiveness? Again, technology can help pave the way.

Therein also lays the challenge for technologists like us: helping businesses use technology to grow, and helping businesses use technology for thrift.Reuters reports that technology executives don't expect the current slowdown to impact them as badly as the bursting of the tech bubble in 2000. That sounds reasonable, because there are fundamentally different reasons for the slowdown then and now, even from a purely technology perspective.

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