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EDITORIAL: Not happy, Jan

EDITORIAL: Not happy, Jan

I'm over it. For months now we have been hearing that this temporary hiatus in economic success was due to the GST, the Olympics, the dot.com crash, the post dot.com wash up . . . Whatever, it would recover and no, we weren't having a recession so everything would come back. Well it's August and now I'm hearing that things will be back by mid 2002 and frankly that's not very reassuring.

So what happened? We all whooped it up while the market soared. No one dared to dampen the euphoria. If you raised a sceptical question you were accused of not getting it!

The financial market and overzealous VCs created a liquidity bubble which allowed so many new start ups. Not only the dot.coms, the IT and telco markets were given a huge leg up. And to support these start ups, IT infrastructure spending was high particularly on servers, networking equipment and storage.

Supply of technology equipment got wildly ahead of demand. Then the abrupt slowdown in capital spending led to an inventory overhang, companies started revising forecasts and the markets imploded. Over-supply was excerbated by all the second hand equipment around, plus sell outs from defunct distributors to fend off their creditors.

Here we are 16 months after April 2000 and the lingering question still is: How long will this last? Most of my conversations are with you channel folk and unfortunately you're not a very positive lot right now. Your natural roles of planning, solving problems, providing solutions, moving equipment are stagnant. You're not making enough money, your competitors are closing down (normally yippee, but too close to home at the moment) and forget bonuses. Not happy Jan!

Everyone has an opinion on whose to blame. "We've gone from a greed cycle to a fear cycle, and people are overtly pessimistic" says Vinod Khosla, a general partner at Kleiner Perkins Caufield & Byers. Yet Linux creator Linus Torvalds adds, "It's too easy just to blame greed. Outrageous stock prices allowed people to do completely stupid stuff, which is how you get creative."

We obviously don't want to look to Japan (almost no growth in a decade!) as a role model for a way out - so let's do the obvious and look at the US. Recent polls there are dismissing recovery in Q3 and Q4 this year with the majority of pundits shooting for Q1 and Q2 in 2002.

Most agree things will start looking up when capital spending increases and demand becomes more predictable. Before that, we need to take care of inventory correction and relocation of the glut of IT supply. Only then can we look at a growth path.

We're all waiting for the two year refresh post Y2K spending. Then there is XP from Microsoft which should generate significant spending plus Intel's 0.13-Micron architecture to optimise the power of XP. Add the move to broadband and wireless. Watch for the rebound in semiconductor company share prices - chips will lead the recovery. That's all promising!

Those of us who have been around long enough know there have been high-tech inspired crashes before. And we survived! Hindsight show us that most technology waves last about 15 years. Remember 1984 when the PC boom-bust followed the shift from mainframe computing? So maybe the Internet wave is just having a wobbly start.

And why wouldn't it be? Not only were the dot.coms making huge technology investments, but traditional bricks and mortar companies were spending heaps on the move to the Internet age. And their current concerns are that the Internet economy has collapsed and the promised business nirvana of their IT investments just ain't there.

The worst thing is they are kind of blaming YOU - the partners who offered the deliverables and integration they're not getting right now.

What to do? At some point fear will be replaced by hopefulness. Your customers have cut back to high levels of efficiency and every sale you make will have to justify its ROI. It will just be a smarter market to play in. The good news is that vendors know that those with the best alliances win and are scrambling for the right channel partners to get to the coveted SME space.

Mid 2002 is still a very long 12 months away. You could tough it out until then or sail around the world in your yacht 'til the worst is over. Whichever, Bon Voyage!


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