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 Hand Wringing and Hail Mary’s
Having been through a ridiculous bubble and an equally ridiculous recession in technology so far in my career, I have some observations for today’s market and the effect on BC’s technology sector. First of all, asking technology CEOs how it’s going is very misleading. From the last downturn I learned that every entrepreneur will keep the glass half full until the glass actually shatters. You can’t blame them… They are unfailingly optimistic and are the chief cheerleaders for their employees, suppliers and customers. After talking to the community, I remember thinking things weren’t too bad in the early days of 2001 and that it might be a small correction. Oops.
Let’s be honest… things have slowed. The technology sector has not been the direct reason for the economic slowdown, as in 2001. Some even predicted it might miss the sector completely and the damage would be limited to banks, housing builders and possibly some retail sectors. But as the financial sector de-risks itself and the US consumer is either sitting in a house they don’t own a cent of (1M US properties in foreclosure and highest level of default mortgages since 1945) or watching their property value and foreign buying power plummet, the economy will slow. The engine of technology buying is the enterprise. The US enterprise will be less motivated to buy IT than last time because the weak US dollar means easier exports. Sales can go up without productivity improvement because the dollar is cheap. Remember, Canada, that’s what we did in the last downturn… we avoided the US recession because our dollar was cheap and we had every advantage possible to export our goods, including technology. Back then, the US customers needed to improve productivity to compete and invested in IT… even in the downturn. Not this time.
The 2008 KPMG Global Competitive Alternatives report just came out (put together by a local consulting firm, I’ll have you know). It affirms my theory that Canada is not as competitive as it was 6 years ago and the US is more so these days, largely because of the weak dollar. So, technology CEOs, are you feeling it yet? Many of you won’t, simply because you are too small to be affected. I’m not denigrating you, just pointing out that you are selling a few million dollars worth of stuff into a niche and may not get whacked by the larger economic slump. Bigger companies that are leaders in their space and have large US customers may start to feel it this quarter. The market says that technology will have lower earnings… the NASDAQ is down 15% from the beginning of the year. Everyone expects the technology companies to weaken.
What can save us? Again, if you are still small, you are likely saved by the fact that you can increase market share simply because there are hundreds or thousands of customers that haven’t heard of you yet. In general for everyone, the mantra should be de-emphasizing the US market. Sell like hell to Europe where they need productivity gains that IT brings because their Euro is sky high. Sell to Asia where thousands of companies are being created every day in places like China and India. What else? Well, we are overdue for the Next Big Thing in technology. The Hail Mary pass that could save the day is a disruptive technology enabler that becomes an instant "must have". A single enabler, like the Internet, is unlikely, but smaller ones could happen. Hey, aren’t we all optimists?
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