TrendWatch Blog
Making technology investments in tough times
02-Oct-2008
As bailouts become a global phenomenon, it's time to review what this all means for you, the technology buyer.
I think there are two main issues here:
- The immediate liquidity crisis and any lingering effects that may lead to longer-term financial sclerosis
- An enduring recession -- which previously left much of the enterprise and web software space unscathed -- getting deepened and extended
Some commentators have opined that more customers will turn to SaaS-based solutions inasmuch as the cash crunch will hit buyers' capital ("CapEx") budgets first. If that's the case with you, you'll want to weigh reduced initial cash outlays against potentially higher operating costs on a long-term basis under a SaaS model. Depending on the type of service provider, you're shifting at least part of the capital burden to your SaaS vendor, so you'll want to weigh their liquidity very carefully.
More generally, it's prudent to examine the financial health of all your major technology suppliers, current and prospective. We've always counseled looking more closely at balance sheets rather than profit-and-loss statements. Many vendors still remain cash-rich, even as they become customer-poor. I'm no financial expert, but I'd value short-term assets over things like "goodwill."
And what about the longer-term effect of a likely global recession? Alan issued the definitive statement: continue important projects, but take your time to do them right. (This is great advice even in go-go days!)
I'm seeing more evidence of technology customers doing this. Reviewing the software procurement schedule laid out by one of our clients yesterday, I marveled at its realism. For the first time in ages we didn't have to push back to try extend the schedule for proper vendor vetting and solution-testing under realistic scenarios. A judicious schedule offers no guarantee of this enterprise getting the right vendor fit in the end, but it seriously reduces their likelihood of ending up with a bad fit.
Best of luck to all our customers and readers.
- Submitted by: Tony Byrne, Analyst
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