What ails the market? Would you believe the Y2K crisis?greenspun.com : LUSENET : Unk's Wild Wild West : One Thread
Interesting opinion piece. The author apparantly believes Y2K added to the late '90s tech boom which as we all know ended sometime during 2000. Other factors in the boom of course included the Nasdaq, IPO start-ups, and a growing belief in the infallability of Alan Greenspan.
OPINION: CORY JOHNSON
Y2K Is Finally Here
What ails the market? Would you believe the Y2K crisis?
Jun 08 2001 12:00 AM PDT
Y2K, for those too young to remember, was a fright that first swept the world in late 1997. Aging computers, short on memory, had been programmed with two-digit dates. And as the end of the century loomed, a host of computers, chips, software programs and mainframes seemed unable to deal with the change from "99" to "00." So it was feared that failing streetlights, payroll systems, telecommunications equipment and microwave ovens would send the world into some sort of pre-industrial chaos.
At the time, some of these claims seemed specious. There were stocks propped up by vaporous companies offering Y2K fixes, companies like Accelr8, Data Dimensions (DDIM), Viasoft, Zeitel - to many they looked and smelled like frauds. But in time, it became clear that Y2K was a very real and looming problem. As promised, we got a meltdown in the financial markets, obsolete product lines, a crippling of small dot-coms, an affliction to large firms like Hewlett-Packard (HWP) and Sun, massive layoffs and unemployment, a protracted global economic slowdown. Crisis? No. A major pain? Probably.
So rightly or wrongly, corporate IT managers began to address this growing concern. A 1998 Morgan Stanley study said one in eight Fortune 500 CIOs would spend more than a third of their budgets on Y2K projects.
But looking back, it seems that the money wasn't always spent where it was expected. Companies like Viasoft saw just $104.3 million in 1999 revenues; Accelr8 had barely $2.9 million. In the end, IBM probably made more money fixing Y2K code than all those startups combined. But the real money was spent on everything else.
Smart companies looked out over three to five years of technology projects and figured ways to squeeze whatever they could into a pre-Y2K time frame. "The Y2K phenomenon hastened a lot of spending," says Richard DeKaser, chief economist at National City Bank. "If you were, for example, going to upgrade your payroll system in 2001, it probably made sense to do it in 1998 instead."
As a result, firms like PeopleSoft (PSFT) and Oracle (ORCL) saw sales surge in 1998. Telecom equipment saw the biggest spike in spending. Figures from the Bureau of Economic Analysis show that the growth in communications spending rose 436 percent from December 1998 to December 1999.
And then, just as suddenly, there was a spending lull. Even late in 1999, some key components of corporate IT spending dipped. As D-Day drew near, IT managers were battening down the hatches. Oracle saw sales fall 15 percent in six months. PeopleSoft's revenues rose just 2 percent in 1999 after 61 percent growth in 1998.
There was a brief halt to the plunge in corporate IT spending in the first half of 2000, perhaps a last hurrah of pent-up demand. But that was it. Companies far and wide seemed to believe they'd bought far more technology than they needed. Spending ground to a halt, and companies like Cisco found themselves unprepared for more normalized growth rates.
"It was one moment of spectacular growth," says DeKaser, "not a new paradigm."
There may be, however, a lasting positive effect of Y2K. CEOs of all stripes were awakened by fear of Y2K. They got to know their IT directors. They now realize technology-driven change will shape their businesses for decades to come.
But that future ain't what it used to be.
-- (another@Y2K.retrospective), June 10, 2001
"The Y2K phenomenon hastened a lot of spending," says Richard DeKaser, chief economist at National City Bank. "If you were, for example, going to upgrade your payroll system in 2001, it probably made sense to do it in 1998 instead."
-- Key quote (email@example.com), June 10, 2001.
Thursday May 24, 12:25 pm Eastern Time
SMALL BUSINESS -- Small Biz Taps the Brakes
By Naween Mangi in New York
Faced with a slowing economy, small companies plan to continue spending on technology -- but at a slower rate than they have over the past several years. ``Things haven't suddenly come crashing down,'' says Ray Boggs, vice-president of small-business research at IDC, an international information technology research firm based in Farmingham, Mass. ``But they're not driving upward anymore, either. So we won't see the usual increase in tech spending.''
Boggs estimates that small companies will increase tech spending by 4%-5% this year, compared with the average annual increase of 8%-9%. ``Even though there are a lot of optimists among small-business owners, there are a lot of pessimists, too,'' he says.
GRIM EXPECTATIONS. Those figures come from an April survey conducted by IDC that also showed that 38.4% of small-business owners are optimistic about the economy, while 41.4% are pessimistic. Small- business plans follow suit, with a similar drop in spending expectations for large companies. According to a recent Goldman, Sachs & Co. survey of corporate info-tech managers, tech spending will decline to a growth rate of 5% to 10%, compared with the 2000 rate of 11% to 12%.
At the same time, IT is increasingly becoming an integral part of running operations for small businesses, says Michael Weir, general manager of Hewlett-Packard's North America small/medium segment and e- business organization. ``They would have been spending more on IT without this downturn, but now they are figuring out a more economical way to get things done,'' he said.
That rings true to Jonathan Zuk, who runs Amadeo Travel Solutions Inc., a $1 million New York-based tour operator. When he started his business two years ago, Zuk couldn't spare the capital to invest heavily in technology. His strategy was initially to set up a Web site and then gradually increase tech spending from there. ``To be able to compete today, especially against the big companies, you need to keep updating your technology,'' he explains. ``As a small company, it's a big chunk of your spending and it's something you do cautiously, but you really can't do without it.''
Zuk spent $5,000 last year on an Internet server, two PCs, and a DSL connection. He recently upgraded his Web site to serve his international clientele better and has plans to spend $10,000 between 2001-2002 on developing customized software for his business.
BUG-PROOFING. In 2000, tech spending was buoyant in most areas, according to IDC, with broadband and Web hosting seeing the largest jumps in small-biz spending. Spending on Internet services by small companies with Web pages rose 29% in 2000, from $1.2 billion in 1999 to $1.6 billion.
But spending on PC hardware declined from an average of $7,100 in 1999 for small businesses to $5,700 in 2000. ``The slowing economy may have played a part here,'' says Boggs. ``But companies may also have pre-bought in 1999 because of Y2K concerns.''
For 2001, IDC estimates that PCs and fax machines will decline in popularity and spending by small businesses in these areas will continue to drop. Meantime, broadband Internet access, Web-hosting services, and notebook PCs will continue to be hot favorites in this segment.
-- recent (firstname.lastname@example.org), June 11, 2001.