You can't go back
and you can't stand still
If the thunder don't get you
then the lightning will
~The Grateful Dead.
Gloomy economic reports continue to pervade our daily news. It has me wondering if the problems on Wall Street will eventually trickle down to the tech sector or if by some miracle it will somehow escape the current crisis. Certainly, if the credit crunch were to continue, it would begin to wear on every business, regardless of the sector, but if the bail out passes and credit loosens technology could be just fine.
In fact, content management vendors could come out of the crisis doing very well. I wrote an Editor's Corner last week for Fierce Content Management called From the ashes of the economic melt down, ECM could thrive. The reason for my optimism is that the current bill expected to pass Congress includes strong oversight provisions. The last time we went through economic free-fall, it involved companies like Enron and WorldCom and Sarbanes Oxley, which called for strict SEC oversight of company accounting policies, was passed and gave rise to a whole new market for content management vendors. A similar dynamic could be at play here as the government demands more accountability in exchange for the billions of dollars it is handing over to Wall Street firms.
Mac User reported recently in article called Economy down, Apple up, that in spite of the economic situation, a survey by Changewave showed that people were still willing to spend money on Apple products, even though overall consumer electronics spending was expected to go down. Of course, this survey was taken during the summer before the September swoon, but it's still telling that in in spite of tightening personal budgets, people still lust after Apple products.
But what will happen to small companies looking to raise capital through initial public offerings? According to a recent Wall Street Journal article, all signs were pointing to steady growth for IPOs until AIG and Lehman Brothers tanked last week. At that point, the WSJ says, all bets were off. Since small companies tend to drive innovation, cutting off capital to them could have a devastating effect on the tech sector as a whole, at least for the short term.
You would think that current economic climate would bode well for open source products. When your budget is lean, free begins to look pretty good. Cloud vendors and the growing virtualization market should do well too. With less money available, it makes a lot of sense to let the vendor deal with infrastructure and to reduce investments in your own data center.
Microsoft could feel the pinch as companies turn away from expensive licenses in favor of SaaS or open source products, but in spite of this, Steve Ballmer expressed confidence last week, that the tech industry as a whole could be buffered from the US economic calamity. Presumably, he included his own company in that assessment.
Let's hope he's right, but until the Bail Out bill passes Congress and we have US presidential elections in November, it's going to take a while before the dust settles. While there are some reasons for optimism for some technology markets, in the current climate, it's hard to know how it is going to shake out. Those of us who make our living from the technology industry can only sit back and hope the tech sector can escape the worst affects of the downturn.