The July meeting of the Capitol of Texas Chapter of ISSA (Information Systems Security Association) featured Peter Kuper speaking on "The Effects of the Economic Downturn on the Information Security Industry."
Mr. Kuper has been covering the software industry for over a decade. He was the lead software analyst at Morgan Stanley where he wrote a number of industry-defining reports and market-moving stock calls. Previously, he was a director and equity analyst at SG Cowen, where he covered the software sector with a particular focus on security. He has also been an equity analyst and vice president at FAC/Equities and a research analyst at Keefe, Bruyette & Woods.
His talk was hard-hitting and to the point about the effect of the current economic conditions on IT and beyond. While there is a lot of buzz about recovery and stabilization, Kuper warned the audience "not so fast". The underlying issues cross industry lines and impact nearly every area of the international economy and the artificial propping up by the government over the past several years have only delayed the inevitable corrections that we are now experiencing.
His slides showed the details of how consumers over-borrowed and under saved for over a decade, taking consumer debt to record highs. Now delinquency rates of mortgages, credit cards and other consumer debt vehicles are also happening in all-time levels. People are defaulting on mortgage payments like never before..
Unemployment rates are growing, and the current government stimulus packages were constructed with 8% unemployment figures as the benchmark. We are now exceeding these levels, with 12% unemployment a strong possibility. Added to this is that these numbers only include those who are reported as out of work. Many, including Kuper, believe the real numbers could be as high as twice that number.
No jobs means no spending, and historically the corporate IT spending levels mirror the consumer spending numbers. With these looking grim over the next several quarters, the outlook for the technology industry will continue to be strained.
Public and private companies are feeling the pressure from investors, VC's and Wall Street to cut expenses and continue to gain new customers. This give cash-rich buyers negotiation power in all industries. Buyers should be looking to push vendors for more value from their relationships. If your company is looking to sell on a transactional basis, you will lose. Companies of all sizes are demanding those they buy from become partners who provide additional value and assist them in discovering more ways to achieve productivity.
Buyer can take advantage of these tough times and play competitors against each other to ensure they are getting the best deal possible. Nobody can afford to lose clients or marketshare during these rough times.
This is a reminder to all of us... regardless of what you are selling.... you must be delivering extra value to all your customers or they will replace you!!!!
As an employee, the advice is the same: Provide extra value or live with the risk of being cut. Lay-offs are still coming, and those who are idle have targets on them. Those who are seen as having "extra capacity" are an expense to their employer. Look for ways to attach yourself to ongoing and important projects that can help the company's bottom line. Think out of the box to discover ways to "make up" your salary (either by finding the company major cost savings or additional revenue).
Everyone (companies and individuals) should be tapping into their networks to connect with best practices from their peers. Find what works, and has not worked, in other companies and implement them in your own firm. Your network is even more important in these economic conditions that at any other time.
While Kuper's message that there is no "V" shaped recovery was not up-beat, it was a realistic reminder that we have a long way to go before this economy bounces off the bottom. Nobody likes bad news, but having a stronger understanding is the key to position yourself and your company for when the next boom does get here!
Have A Great Day.
thom
1 comment:
This sounds absolutely fascinating. I'd love to sit down with him and converse more over a meal and some wine. :-)
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