The tech industry in a downturn

We’ve heard how todays economy affects Joe the Plumber and Joe Six-pack, but what about JoeTek? 🙂

This economic downturn has been compared to the Great Depression in the 1930’s, but the technology sector as we know it today wasn’t around at that time.  The dot-com bubble bursting 8 years ago was more of an indicator for how things will shape up for us in the coming months and years.

Economic cycles are to be expected.  They are typically a good thing for our industry – a filtering, a culling of the herd.  The weakest are taken out of the picture, so that the strong can thrive on the other side.  The problem is that some really good companies will not make it, and some really bad companies will. 

We are certainly not as vulnerable as we were in 2000.  We haven’t had the crazy IPOs and unrealistic valuations that plagued us in the 1990’s.  In fact, the big drivers of technology growth in the past 8 years were born out of the last recession – blogging, social media… The poster-children of tech today were all conceived during the last downturn, and grew through venture instead of going public.  We’ve learned from our mistakes in the 90’s and protected ourselves in advance.

The bottom line is that the technology industry depends on the health of the economy as a whole.  The hardware and software industries rely on the banks, manufacturers and big business to buy and upgrade thousands of PC’s on a regular basis.  The web industry depends on advertising dollars from traditional businesses to sustain itself. 

Without health in the overall economy, the tech industry will suffer.  When non-tech businesses are faced with tightening budgets, web marketing, advertising and capital expenditures for upgrades are among the most vulnerable for cuts.

So what should tech companies do in the face of decreasing budgets all around?  In the absence of client business, if you’ve got resources on the bench, now is the time to innovate. 

In the last downturn, web developers with too much time on their hands invented blogging, social networking, and ajax.  They turned static web pages into tools that have been used to connect people and change how we are productive.  YouTube launched.  Facebook connected people.  Even Google hit their stride and overturned the industry by launching AdSense and AdWords during the downturn. 

So, what will you invent as the economy crashes this time?


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