Channel Call

Tech Starts to Feel the Pain

IT seemed immune to the financial crisis, but companies are now reacting as news becomes more ominous by the day.

Throughout 2008, there were prodigies and portents enough that the economy was in trouble. For a while, though, even as those ominous signs worsened, the tech industry seemed like it might whistle past the worst of it. Early on, the numbers in surveys on IT managers' spending plans stayed fairly strong. Expectations for IT hiring remained positive.

But as the credit markets seized up and Wall Street plummeted in September and early October (the Dow is more than 5,500 points off its year-ago peak of 14,164 as I write this), the bloom came off the tech rose. Tech stocks are suffering as badly as nearly every other category, except for the incomparably abysmal financial sector.

There's no better place to look for evidence of this recent change of mood than at Microsoft. Redmond has been one of the most amazing cash-generating machines of the last decade. Profits flowed when times were relatively good in the mid-2000s and even when things were bad in the early part of the decade.

About four months ago, Microsoft Chief Operating Officer Kevin Turner was channeling Horatio Alger. At the Microsoft Worldwide Partner Conference, Turner regaled partners with tales of how a positive attitude, hard work and some business savvy could lead smart partners through tough times.

But by late September, even the relentlessly upbeat Steve Ballmer sounded rattled. "Financial issues are going to affect both business spending and consumer spending, and particularly ... spending by the financial services industry," Microsoft's CEO told reporters in Norway. "I think one has to anticipate that no company is immune to these issues."

When the captain of $60 billion-a-year Microsoft feels that events are spiraling beyond his control, what's a partner to do?

Back in May, we did a cover story ("Staying Afloat") that featured partner-company executives talking about their strategies for surviving in uncertain economic times. Some of those approaches still apply, such as redoubling your emphasis on customer satisfaction to make sure you don't lose steady sources of ongoing revenue and looking for ways to make a buck while helping your customers save money. We pointed you to Microsoft's Big Easy partner-subsidy offer, which the software giant brought back in recent months. But some strategies discussed in May are looking dicier now. For example, leading with financing could be getting tougher as credit standards tighten.

Still, many of those actions are under your control. Unfortunately, there's not much you can do if the bank isn't willing to extend the credit you rely on for payroll or inventory or expansion, even if you've always been a responsible user of that credit. We're all left to watch the action among the national governments, central banks and credit markets, to wait and to hope.

What are you doing to survive in these turbulent times? Let me know at sbekker@rcpmag.com.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.