So, lets bring this analysis up to the present, and see how it all compares. Unlike 2002, there is no similar software glut in either applications or infrastructure. Au contraire companies have been cautious in introducing new infrastructure in recent years, and as far as I can tell, most are planning to continue long-term upgrade projects that will easily take them through 2008.
Point number one: Theres still a lot of infrastructure as in enterprise services and the like to sell, even if the overall economy starts slumping. Reinforcing point number one is the fact that those line-of-business buyers havent lost the mandate to buy software that can improve the top and bottom line.
Which brings us to point number two: Theres still a healthy demand for innovative applications. If a software expenditure can be justified with respect to improving revenues or lowering costs, the green light is still on. Surely, sectors like financial services and retail may be in for a serious slow-down, but by and large line-of-business buyers realize that, even if things do slow down, enterprise software can increase productivity, improve competitive advantage, and otherwise have a positive ROI and positive net effect on the business.
Finally, theres point number three. So far, despite the very negative news that seems to arrive every day, whats happening in the credit and financial markets aint nothing compared to the meltdown when the dotcom bubble burst. Lets remember those heady days of disintermediation and e-commerce: that bubble was all encompassing, with the entire economy, including many many ma-and-pa investors, playing the stock market like hedge fund managers. When the bubble burst, everyone got dinged, or worse.
Now, while every investor is getting dinged by the fallout from the falling market, the big losers are, very unfortunately, a lot of poor people who were sold mortgages they never should have bought, and, much less unfortunately, some very wealthy individuals and institutions who bought the securities built on this sub-prime mortgage house of cards. When you see companies like SocGen roiling a big European exchange because of a rogue trader, its actually a relief to know that the whole business model of the Western economy isnt being challenged by a reality check that was long in coming.
Thats the difference between then and now the fundamentals are still fundamentally strong, and the koolaid from the sub-prime mortgage mess hasnt been drunk by an entire population of investors.
And thats why point number three is so important, and why a lot of strong tech companies turned in strong fourth quarters. Theres still a lot of strength in the economy, and still a lot of reasons why businesses wont just disappear they way they did in the last recession.
So, take a breath and think of 2002, and then be glad its 2008. Enterprise software is still a strong bet for buyer and investor alike. And will continue to be so, despite the chaos in the rest of the economy. See you at the upturn.