Shark in the water: or will the recession bite?
June 17th, 2008 by Benjamin KuoI’m an optimist by nature, but nowadays — given the number of foreclosures I drive by in neighborhoods, and the dismal economic picture you hear talking to people on “main street,” I feel like the technology industry is happily swimming along through the ocean– unaware of a shark in the water following behind. That shark — the threat of the overall economic conditions impacting high tech companies — hasn’t bitten yet. But, I keep getting the feeling that we ought to be looking behind our shoulders somewhat.
There are reports — like this one from InformationWeek — showing that IT and other high tech jobs are starting to see recessionary pressure. Plus, you’ve got to imagine with consumer confidence at a new low, and gasoline prices at a near high, that the economy will hit the consumer–which ultimately is responsible for a huge amount of the dollars spent in the high tech economy.
Despite the overall picture, though, I constantly run into people in the high tech industry who have absolutely no worries about the economy. In fact, they are in full “boom” mode, where the only thing that seems to matter is who has the “hot startup” of the day, the best launch party, or who has raised the most money. Perhaps the startup industry — which seems to be driven more by the amount of capital invested into firms than money being made by those companies — is sufficiently disconnected from the overall economics that it won’t matter. But it seems that you can only go so far on the “sugar rush” companies get from venture funding, before the full impact of a sluggish economy will have a greater impact on startups.
Then again, maybe we’ll be lucky this time. Some CEOs have told me that they’re actually seeing an uptick in business — in particular, in the online advertising space — as the recession has caused advertisers to direct their ad dollars to the more effective online arena. I’ve also heard others in the software-as-a-service area also seeing the same kind of increase, from companies more interested in having a monthly subscription than a huge capital commit/install. There’s a chance that maybe there are enough overall factors driving people to online companies that they’ll thrive, because, not in spite of, any recessionary environment. One hopes so–maybe that shark won’t be hungry enough to take a big bite out of the high tech industry…
