Dot Com Bust: Ten Years After...

It's ten years since the dot com bubble began to seriously deflate; the financial climax had its high water mark on March 10, 2000 when the NASDAQ peaked at 5132.52.
Written by Oliver Marks, Contributor

It's ten years since the dot com bubble began to seriously deflate; the financial climax had its high water mark on March 10, 2000 when the NASDAQ peaked at 5132.52. By September of that year people were starting to feel a lot less financially irrationally exuberant and started heading for the exits.

The subsequent stock market crash caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002, and those parts of the world which were the epicenters of the dot com boom, such as the San Francisco Bay Area, were plunged into a financial nuclear winter.

Our current global financial credit situation ten years later is much more benign for the tech industry in comparison to the Wall Street overheated dot com "Get Rich Quick" meltdown ten years ago, but again there are warning signs appearing around funded companies.

Once rounds of funding are made based on market projections the mini bubbles start to inflate: venture capitalists typically need a ten times plus return on their investment. This is achieved with a vision of software frameworks that are repeatable across large market segments, and the pressure to make seat sales efforts typically ramps up significantly once venture money comes into play.

The enterprise IT space, after a couple of years of budget haircuts, is relatively healthy as we begin to emerge (in some cases on Bambi legs, in others with very deep pockets) from recession, and investment in infrastructure ramps up, along with strategic mergers and acquisitions.

With this business momentum comes funding plays, and the enterprise 2.0 collaboration space is looking very crowded this fall. Many smaller software vendors seem to be able to survive with a handful of clients - they don't necessarily need to scale up in size. There's always the possibility - or in some cases hope - of being rolled up into a larger offering, either as a component of a complimentary larger suite.  Successfactors has cleverly achieved this with Cubetree, which they are essentially giving away on a fremium model to clients, as a sort of gateway collaboration drug to status updates.

Salesforce are rapidly expanding their Chatter product as a real time collaboration cloud in context to their Salesforce CRM and Force platform workflows - more on this in a future post - and wherever you look there are collaboration adjuncts being added to existing products new and old that take advantage of ubiquitous broadband connectivity and mature, stable 2.0 Ajax libraries and server side Javascript.

Oracle announced the unification of their product lines under the Fusion name this week, as covered extensively elsewhere - here's a great commentary from my colleague Sameer Patel. Larry Ellison: "Collaboration is fully integrated into Fusion, and process automation is built in although it goes well beyond traditional process automation",  along with sophisticated Business Intelligence (BI) and contextual information flows.

So plenty of shiny new objects to be considered by the buyer - the challenge as always is around coping with the legacy systems that seemed so state of the art at the time of purchase, and divining how to apply the endless new waves of technology to solve business problems.

The lure of the Initial Public Offering - floating shares on a stock exchange - is now stacking up in multiple industry sectors, not just software. The collaboration space is no exception, and if all goes well investors backing a company with their money demonstrates a belief in the efficacy of the product.

As the dot com bust proved however, there's only so long companies such as Xcelera.com could fool the markets and its analysts at the height. Now we have Facebook valued in theory today at a very theoretical $33,000,000,000, and the financial mania around all things 'social' has been torquing the more sober enterprise world perspective towards consumer online and mobile experiences.

This is no bad thing and has seen some terrific user interface and experience improvements in business products along with enthusiasm for devices such as the iPad. However the need for a successful exit for investors always puts pressure on the messaging around products, and this summer has arguably seen some exaggerated promises for the 'change the world' aspects of 'social' software in business.

The danger of pre IPO hype is that overheated rhetoric and promise can backfire badly, as happened in the dot com boom era, both pre ipo and afterwards when overhyped product failed to deliver as claimed. Wall Street money does strange things to business ecospheres, altering and pressuring the natural maturation cycles of product development and offerings.

With the livelihoods of both software company employees and the end users who buy into product claims at stake, all to often the collateral damage caused by overpromising and sold products is felt by the broader movement. In the dot com era a lot of solid companies failed due to companies such as Xcelera.com, a financial shell posturing as a 'push' company like Akamai that figured out the best way to deliver content across the web. The fallout from their flameout was widely felt.

With Enterprise 2.0 now maturing to understand enterprise scale issues and problems, small and medium business requirements (and often discrete sub division silos of larger companies) is a smaller world of operational collaboration and connective efficiencies.

We're entering a critical phase for the software vendors who provide the tools that help enable the realization of business strategy and tactics to get to agreed objectives that are considered of value to the buyer.

Time and again software is designed that's modeled to fit the Zeitgeist of the moment, but is essentially a snapshot of a moment in time. Those purchases which seemed so world changing a few years ago are now merely coped with by current users in different times: to quote Wayne Gretsky A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.

Not allowing software vendor hyperbole to overpower judgment of where you want to be is critical to strategic success.

Video: Rock Song 'I'd Love To Change the World' by Ten Years After. All the rage in 1971...

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