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Sinking Satyam

Posted on 2008/04/22 by admin2014/12/12

I recently gave a talk at the Software Licensing and Marketing (SLAM) conference where I painted a dower and gloomy picture for technology marketing this and next year.

Seems I may have been overly optimistic.

Though not yet officially proclaimed, we are in a recession. If my wet cocktail napkin math is any good, we will in this recession for quite some time — well into next year. Oddly though, in the earliest quarters of this recession some multi-national tech companies (Oracle, IBM, etc.) reported amazingly good sales growth.

And this will be a short lived phenomenon as the recession spreads.

Dig into their numbers. For example, IBM recently reported an 11% sales growth. But if you subtract the effects of the falling U.S. dollar, IBM’s sales grew a mere 4%. Granted, any real growth in the early part of a recession is a Good Thingâ„¢. But for an industry giant like IBM to slip to a 4% growth rate indicates the beginning of a downward slide.

That recessionary slide is going international.

We live in a global economy. Unlike any other time in human history, a major change in fortunes in one locale will impact economies everywhere. Thus tech companies that are currently doing well abroad will soon not be doing so well anywhere. The temporary influx of cash will rapidly diminish as the dollar finds a floor and the U.S. recession spreads like an Asian flu.

Satyam may be the leading indicator.

Satyam has routinely experienced growth rates of 45% or more a year. But for fiscal 2009 they recently scaled back their expectation by 40%. And this is a preliminary pull-back and will get worse. With oil inflationary pressures raging unabated, with Europe and the Americas reducing corporate spending, and with hyper wage inflation in India, the situation for Satyam is likely to get darker than a certain hole in Calcutta.

For tech marketeers, this means the number of recession survival options is dropping faster than a college girl’s top during Mardi Gras. U.S. is down, Europe is pulling back, and now Asia is sliding.

What makes this period exceptionally worse for tech is that we are at the end of one of our industry’s very predictable cycles. During good economic times customers go on buying binges, acquiring all forms of new technology, including stuff that they don’t really need. The market then goes from this binge phase to a period of technology indigestion, where customers quit consuming and try to integrate everything they have bought.

The current indigestion phase has arrived at the same time as the recession. Ouch!

Expect to see a lot of small tech companies with promising wares to be gobbled-up in the coming year. Many will simply die, but others will find acquisition exits to avoid becoming corporate corpses.

For the rest of you, Silicon Strategies Marketing has some tactics and strategies for surviving a recession. Give us a call and write us a check … we’ll be glad to help.  There may be a recession, but we have decided not to participate.

Posted in Market Trends, Marketing permalink

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