A good friend today told me how the Information Technology industry has been immune to this recent slowdown of the economy. He even justified how some companies in the silicon valley hiring crazy,
His argument: The valley has learned from its mistakes in 2001 and companies have put measures to tackle the turbulences rising from economic slowdoan of from anything for that matter.
When the whole of US is felling the pinch, Why the silicon valley is not felling the slowdown yet?
I would say.. we are seeing a slowdown but we are not actively feeling it, Many silicon valley companies are silently laying off people and even the startups are now complaining on how difficulty it has become for them to secure round C funding.
Apart from the resistance we have built from our experiences in 2001. The lack of this feeling is caused due one main factor
Visibility Into The Forecasting Process
Historically global Information Technologies have struggled to clearly understand their opportunity and forecast numbers upon each quarter close. Complex business practices, varied product offerings, broad sales teams operating in multiple countries etc make the sales operations management some what unmanageable. Despite of the best analytical and data collection tools this function has remained a challenging area for finance and IT departments.
This is the primary reason why companies fail to read & act on alarming project bookings numbers for upcoming quarters resulting is wrong or no proper guidance to investors and wall street.
In simple terms what this means is..once there is global slowdown it will take anywhere from a few months to few quarters for a companty to really understand how bad it has been impacted.
Also many IT companies reporting their Earnings In Currencies Stronger Than US Dollar
Until a few months ago many international currencies held themselves fairly strongly against the US dollar. US technology companies which were selling in countries like China and India enjoyed the luxury of reporting better earnings due to the exchange rates. Inflation in growing companies like India and China is at all time high which is helping US technology companies to may be sell less in volume but make more per sale.
Again it takes some time to really see how the global markets will perform given the instability. Carefully study upside and project bookings numbers that your sales folks report.
Where Do You Go From Here?
So my strong hunch is.. we will see a slowdown in the silicon valley but it will be important that you stick to what you are doing. If you want to go the entrepenurial way..here is what I suggest.
During these bad times, hire the best for less and invest your time and effort in development. Quick Go-To-Market is the ultimate goal of every company and that should be your goal as well. In a diminishing market situation like this, your best bet is to focus and create good software that is robust, futuristic and mature.
We somewhat saw this in 2002 and 2003. Post 2001 NASDAQ collapse many software companies were wiped out. Some entrepreneurs left the entrepreneurial world and went back to full time jobs. The very few who decided to stay in the game pretty much excelled in the later years. Despite of many obstacles these entrepreneurs refined their business models, hired the best talent at discount and created good darn products.
Here is a quick glimpse..
Marc Andreessen the founder of Netscape and Opsware went on to create Ning.
E Williams started Twitter, Odeo and Blogger( Now acquired by Google)
M&B Trott a one time employee of Excite started Six Apart right around year 2000
R. Hoffman former employee of Paypal went on to create LinkedIn while playing an influential role in DIGG, SIX Apart and Friendster.
M.Lechvin again an employee of Paypal went on to start Slide and played an influential role as an investor in Yelp.