Economic downturn, recession, depression, global meltdown, Armageddon, whatever you call the current situation it involves falling sales, lower prices, unemployment, bankruptcies, repossessions and cost cutting by businesses. Apart from a few like pharmaceuticals every business is going to experience changes related to the economy.
However, those of us who work in Internet related businesses should not be so gloomy. For some see the Internet as the solution to the current problems. The Internet is not going to save the economy (leave that to the new US president) but it could provide opportunities for companies to survive the downturn.
Traditional business is expensive; large overheads in property, people and equipment combined with limited customer reach (few people travel across countries to visit a particular store!). The Internet offers lower overheads and a bigger customer pool. This does not just apply to B2C but B2B as well. For many companies their online business will allow them to continue trading while they downsize their physical investments.
I know this argument is old but surely now it is even more relevant. We are already seeing some companies starting to invest in their web activities which perhaps have lost focus in recent times when the economy was booming. For web based businesses this could be a time of extraordinary opportunity.
For example, as the high street banks suffer with their balance sheets and having to cope with the cost of running branches online banks can avoid these overheads. They could be better placed to not just weather the storm but perhaps pick up business from their more traditional competitors.
For start-ups the situation is just as good. Many VCs still have funds available and often look beyond the current economic period anyway. Although a serious contraction in the angel market is probably unavoidable. For those with funding there are many advantages to the current situation. Smaller head counts, lower property and equipment costs and the low cost of technology (open source, vendor programs such as BizSpark and cloud computing) combined with a more agile business model provides a competitive advantage over perhaps bigger but more traditional competitors.
Such companies should not be complacent however and it is right that we’re seeing lay-offs in the start-up industry just as everywhere else. There has been a trend in recent times for start-ups to bloat with excess people and perhaps unnecessary spend (upgrading to better office locations for example). The economic downturn may help to get back to the leaner, meaner style of start-up that we used to see more of and perhaps avert a dotcom style problem in the future.
One of the constant issues in IT whether amongst start-ups and traditional companies is excess in terms of people, infrastructure and wasted spend from inefficient processes. This gives all of us an opportunity to reflect on how we run our businesses and manage our development teams and processes. It is always surprising what amazing things can be produced by small teams, in short timescales. Many start-ups often begin this way and then feel the need to expand as the funding comes in.
Now may also be a good time to investigate some new technologies such as cloud computing that can reduce overheads. We have documented in previous blog posts and through various projects how some of the latest technologies can seriously reduce and even avoid software and hardware costs.
Our AlertThingy AIR application costs us nothing in infrastructure costs but only distribution (download bandwidth). “Meet with Approval” that we built last year utilised Microsoft’s Express range of development software that is free. The new BizSpark program provides a wealth of development and production software at no cost now. A very recent blog post discussed some of Adobe’s new cloud services that seriously reduce the cost of building collaborative software.
So now is a time to be sensible but certainly not panic as what may prove the end of an era for come businesses may just be the start of a bright new era for others.