It was all doom and gloom, all the time.
Ah, those were the days…. of deeply flawed analysis that failed to see the subtleties at work in what was a major shift in IT spending and software utilization. Rather than doom and gloom, the trends of 2002 heralded the beginning of a new boom in enterprise software, one that today promises to keep much of the enterprise software market largely immune to the current economic crisis.
And as long as things stay screwed up the way they currently are – with bad loans, poorly regulated financial practices, and rogue trading à la Société Générale leading the market’s current malaise – the chances are actually quite good that enterprise software will emerge from 2008 with real growth.
Here’s what was really happening in 2002. Don’t get me wrong, we were definitely in a recession, and general market growth, wages, unemployment and other factors were strongly in favor of that conclusion. But the enterprise software market actually had a very different set of problems on hand: a run-up in spending for Y2K and dotcom business models that left companies flush with largely unused software and not enough business coming in to justify buying more.
This software bloat was all over the place. Companies had bought thousands of seats of CRM, SCM, procurement, e-commerce, and other products in the fervent hope that software buying alone would help them remain competitive in case – and this was really an “in case” moment – one or more of the current market fads would turn out to be the key competitive differentiator that would propel them into the brave new dotcom, e-business world.
This spending on applications had followed fast upon a huge surge in infrastructure spending to ward off the other fantasy of the fin de siècle: the so-called Y2K bug. In a similar way, Y2K-driven spending produced an infrastructure glut that left many companies with a severe case of software indigestion as the recession hove into view.
The irony of this software surplus is that, pretty much simultaneously, vendor claims that enterprise software was a net, and measurable, contributor to overall productivity were starting to be recognized as fact, and not just wishful thinking. Alan Greenspan started the ball rolling in 1999 with the almost startling observation that technology spending correlated with overall productivity. As the new century got under way, more and more evidence that IT spending could drive greater productivity was emerging from all sectors of the economy.
Which brings about the other reason why the doomsayers of 2002 were missing the mark. The recognition that IT increased productivity heralded the start of a significant shift in high-tech buying patterns, particularly when it came to enterprise software.
A new buyer emerged, the line-of-business buyer, for whom software was a means to drive direct revenue growth and competitive advantage. These buyers started showing up in droves, opening up new revenue sources and new opportunities for a software market that had traditionally sold much larger, and admittedly very bloated software projects, to big budget IT managers.
So while survey after survey showed that IT spending was hitting a wall, it was clear that the surveys were asking the wrong buyers – CIOs and IT managers, whose budgets were pegged to overall financial performance and for whom the recession meant a genuine cut in spending. But if anyone had bothered to ask the line-of-business managers, they would have found that these buyers were waking up to the fact that strategic application deployment could have a significant impact on bottom and top line revenue, and they were starting to buy and buy and buy.
So, let’s bring this analysis up to the present, and see how it all compares. Unlike 2002, there is no similar software glut in either applications or infrastructure. Au contraire – companies have been cautious in introducing new infrastructure in recent years, and as far as I can tell, most are planning to continue long-term upgrade projects that will easily take them through 2008.
Point number one: There’s still a lot of infrastructure – as in enterprise services and the like – to sell, even if the overall economy starts slumping. Reinforcing point number one is the fact that those line-of-business buyers haven’t lost the mandate to buy software that can improve the top and bottom line.
Which brings us to point number two: There’s still a healthy demand for innovative applications. If a software expenditure can be justified with respect to improving revenues or lowering costs, the green light is still on. Surely, sectors like financial services and retail may be in for a serious slow-down, but by and large line-of-business buyers realize that, even if things do slow down, enterprise software can increase productivity, improve competitive advantage, and otherwise have a positive ROI and positive net effect on the business.
Finally, there’s point number three. So far, despite the very negative news that seems to arrive every day, what’s happening in the credit and financial markets ain’t nothing compared to the meltdown when the dotcom bubble burst. Let’s remember those heady days of disintermediation and e-commerce: that bubble was all encompassing, with the entire economy, including many many ma-and-pa investors, playing the stock market like hedge fund managers. When the bubble burst, everyone got dinged, or worse.
Now, while every investor is getting dinged by the fallout from the falling market, the big losers are, very unfortunately, a lot of poor people who were sold mortgages they never should have bought, and, much less unfortunately, some very wealthy individuals and institutions who bought the securities built on this sub-prime mortgage house of cards. When you see companies like SocGen roiling a big European exchange because of a rogue trader, it’s actually a relief to know that the whole business model of the Western economy isn’t being challenged by a reality check that was long in coming.
That’s the difference between then and now – the fundamentals are still fundamentally strong, and the koolaid from the sub-prime mortgage mess hasn’t been drunk by an entire population of investors.
And that’s why point number three is so important, and why a lot of strong tech companies turned in strong fourth quarters. There’s still a lot of strength in the economy, and still a lot of reasons why businesses won’t just disappear they way they did in the last recession.
So, take a breath and think of 2002, and then be glad it’s 2008. Enterprise software is still a strong bet for buyer and investor alike. And will continue to be so, despite the chaos in the rest of the economy. See you at the upturn.
Ethics and Artificial Intelligence: Driving Greater Equality
FEATURE | By James Maguire,
December 16, 2020
AI vs. Machine Learning vs. Deep Learning
FEATURE | By Cynthia Harvey,
December 11, 2020
Huawei’s AI Update: Things Are Moving Faster Than We Think
FEATURE | By Rob Enderle,
December 04, 2020
Keeping Machine Learning Algorithms Honest in the ‘Ethics-First’ Era
ARTIFICIAL INTELLIGENCE | By Guest Author,
November 18, 2020
Key Trends in Chatbots and RPA
FEATURE | By Guest Author,
November 10, 2020
FEATURE | By Samuel Greengard,
November 05, 2020
ARTIFICIAL INTELLIGENCE | By Guest Author,
November 02, 2020
How Intel’s Work With Autonomous Cars Could Redefine General Purpose AI
ARTIFICIAL INTELLIGENCE | By Rob Enderle,
October 29, 2020
Dell Technologies World: Weaving Together Human And Machine Interaction For AI And Robotics
ARTIFICIAL INTELLIGENCE | By Rob Enderle,
October 23, 2020
The Super Moderator, or How IBM Project Debater Could Save Social Media
FEATURE | By Rob Enderle,
October 16, 2020
FEATURE | By Cynthia Harvey,
October 07, 2020
ARTIFICIAL INTELLIGENCE | By Guest Author,
October 05, 2020
CIOs Discuss the Promise of AI and Data Science
FEATURE | By Guest Author,
September 25, 2020
Microsoft Is Building An AI Product That Could Predict The Future
FEATURE | By Rob Enderle,
September 25, 2020
Top 10 Machine Learning Companies 2021
FEATURE | By Cynthia Harvey,
September 22, 2020
NVIDIA and ARM: Massively Changing The AI Landscape
ARTIFICIAL INTELLIGENCE | By Rob Enderle,
September 18, 2020
Continuous Intelligence: Expert Discussion [Video and Podcast]
ARTIFICIAL INTELLIGENCE | By James Maguire,
September 14, 2020
Artificial Intelligence: Governance and Ethics [Video]
ARTIFICIAL INTELLIGENCE | By James Maguire,
September 13, 2020
IBM Watson At The US Open: Showcasing The Power Of A Mature Enterprise-Class AI
FEATURE | By Rob Enderle,
September 11, 2020
Artificial Intelligence: Perception vs. Reality
FEATURE | By James Maguire,
September 09, 2020
Datamation is the leading industry resource for B2B data professionals and technology buyers. Datamation's focus is on providing insight into the latest trends and innovation in AI, data security, big data, and more, along with in-depth product recommendations and comparisons. More than 1.7M users gain insight and guidance from Datamation every year.
Advertise with TechnologyAdvice on Datamation and our other data and technology-focused platforms.
Advertise with Us
Property of TechnologyAdvice.
© 2025 TechnologyAdvice. All Rights Reserved
Advertiser Disclosure: Some of the products that appear on this
site are from companies from which TechnologyAdvice receives
compensation. This compensation may impact how and where products
appear on this site including, for example, the order in which
they appear. TechnologyAdvice does not include all companies
or all types of products available in the marketplace.