Recession and the Web: This Time?

by Simon St. Laurent

In 2001, the sky fell for web development. Everything fell as the dot-com bubble broke. In 2008, even though the US economy's not looking so good, there's more hope for the web to follow the economy's course rather than shatter and fall below it.


2008-02-28 06:17:16
On the other hand

I've no doubt that for business you are right. There are some complex issues though. Say you are building a system with web front ends and servers that rely on cell phone services as part of the deliverable. The cell phone provider reliability varies enormously and that limits markets in ways that are tough to predict. These couplers in the shadows (not hidden but not at the edge of perception), can combine to dry out a market.

In a recession or loss of income, what were becoming necessities are seen as luxuries. It comes down to choices between them, so given shrinking income due to rising prices does a family get rid of the daily newspaper (a cheap item overall for depth of news), the multiple cell phones (one per child), the car for the teen-agers, the cable TV, yoga classes for Mom, violin for the daughter, math tutoring for the son... or their broadband Internet connection with the attendant fees such as subscriptions to World of Warcraft?

It isn't that the web industry will collapse. The question for sales is will it expand at the current rate because that is what the marketing group uses for budget given that businesses tend to live on future income, borrow for current expenses, and have to very carefully monitor the time from bid to sale to cash receivables.

It's a complex problem and predictions are tough.

2008-02-28 13:08:58
Right, Kurt. The critical problem becomes revenue realization against outstanding loans and the increasing costs of obtaining loans. For example if one is invested in online gaming, one has to ask in a crunch where the online entertainment industry is headed: growth or decline, and at what rate. Some speculate increase in gas costs means the value of online entertainment is more attractive. Some would say that balancing the cost or online entertainment against other necessities means it is less attractive.

It is hard to say much about individual markets where the costs to keep current are changing. R&D usually takes a very hard hit. Big ticket items (software tools, transportation, etc.) take a hard hit. The late seventies were revealing to those of us who say car sales declines, home sales decline, and so on. In fact the way we knew it was over was those awful K-cars starting to appear everywhere.

But as to the web, a big difference is the web technology is very common in all other aspects with a lot of growth in the infrastructure markets. Whereas ten years ago I could say with confidence public safety was a late adopter making little use of it, now exactly the opposite is true. Health systems? Not as much but on the increase. Security is a particular problem in both of these still with hack attacks on a sharp rise.

If R&D takes a hit, then it makes it tougher to fund infrastructure improvements that is, is it worth retooling XML or investing in XML's replacement, or the next generation for web/internet clients that may not use markup in the same way as the current one?

But the web collapsing like a bubble? That won't happen. It is fiber and sinew now in the business systems even if growth slows elsewhere. The fire/fuel/air analogy is a good one.