“Maywe live in interesting times.” I always found this old proverb to be the mantra for the technology industry. It is always interesting, changing and never boring.
Since the dot-com meltdown, it seems as if every macro-economic woe has a few analysts making dire predictions for technology growth. I will tell you though that, in my opinion, the dot-com bust was a very unique situation and one that will not likely happen again. All industries can be impacted based on macro-economic growth. It’s a simple reality. The times have changed, however, and much of the technology industry is on a new curve.
Back in the now infamous dot-com era, there was a unique dynamic to technology acquisition. Companies (mostly startups and new “Internet” divisions of larger companies) had these amazing business plans that, if they were correct, would require massive amounts of compute, storage and software. Consumption of IT in advance of actual growth became an imperative as growth was supposedly coming so fast that it would be impossible to build capacity once the growth curve hit. The cash in the system made the acquisition part of the plan easy. In short, consumption was inordinately ahead of any real demand.
As the growth failed to materialize, we were faced with significant overcapacity and the tech market “spiked.” This, of course, was very ugly. If you want to see this spike in detail you can look at the chart of total storage capacity growth over time. It is amazing how consistent this growth has been (in the area of 60% per year) over time. The funny thing is that the growth actually ramped like never before in the late 90s, 2000 and part of 2001 and then only to crash for the two years following as the excess capacity was absorbed.
As people ‘debate’ if we are in a recession or not, I continue to hear all sorts of predictions about the potential impact to the technology industry. While we are tied to macro-economics, for most technology companies this is not even close to what we had to deal with in 2001/2002.
IT capacity today is acquired when it is needed. Software is acquired when there is a definitive ROI (Return on Investment). In short, IT is a business-critical and key productivity asset for companies to maintain competitiveness. New technologies such as virtualization are helping to reduce costs by increasing efficiency. Technology that can help companies be more competitive, reduce costs, and/or reduce business risks is not something that is discretionary. It is even more of an imperative today.
It is funny that when disasters occur, people tend to take action and, in general, there is enough change along with ‘memories’ so that the likelihood of the same disaster happening again is usually pretty low. While we can always learn from the past, it can only serve as a guide to what the future will bring. In this case, we are not dealing with any overcapacity in IT, and it is more critical than ever for companies to seek improved efficiencies, productivity gains and risk reductions.