Tech boom or bubble? Industry profits rival 2000 Internet boom

Summary:Pent-up demand helped drive record sales of enterprise software and systems in 2010; but something else was afoot.

A couple of years ago, it looked like the roof was caving in.

But a funny thing happened on the way to Great Depression 2.0. The tech industry decided not to go along for the downhill ride. As The Mercury News reports, the 150 biggest public companies in Silicon Valley "had their most profitable year in history in 2010," with "combined stock value climbed to the highest level since the Internet boom of 2000."

Apple and Google, two Valley residents, in fact, have been ruling the world in recent times.

But other IT vendors are also in rapid growth mode. And as just reported by ZDNet editor-in-chief Larry Dignan, companies such as IBM, Intel, VMWare, Juniper and Riverbed also had strong results for the first quarter of this year.

Clearly, judging by the rocketing performance of leading IT vendors, enterprise software and systems are hot. There may be pent-up demand on the part of enterprises with legacy or cobbled-together systems finally being unleashed, but something else is afoot as well. IT proved itself during darkest days of the recent recession, providing efficiencies, insights and access to market opportunities on tight budgets and limited staffing resources.

Are we in another tech bubble destined to burst all over the place, as in 2001-2002?  That's also a subject of endless speculation. Boom or no boom, unemployment in Silicon Valley is still at a painful 10.6%, so there is still room for growth.

Some folks at University of Pennsylvania Wharton School seek to calm fears of a potential tech bubble. If anything, valuations for startups or smaller IT ventures are climbing at a modest rate overall, according to experts at the university:

“One angel who works closely with an East Coast technology accelerator says he is seeing companies coming out of the accelerator pull in $3 million to $4 million in funding, compared with $2 million to $3 million for comparable companies a year ago. That is an uptick for sure, but it is small in the context of VC funding.”

In addition, many of the actual values of social network and cloud companies are unknown, since most have not gone public. The report also acknowledges that it's far cheaper to start and fund a business these days, thanks to cloud computing, mobile technologies and social networking.

Topics: Browser, Banking, CXO

About

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. Joe is co-author, along with 16 leading industry leaders and thinkers, of the SOA Manifesto, which outlines the values and guiding principles of service orientation. He speaks frequently on cloud, SOA, data, and... Full Bio

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