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To: Amy J who wrote (168757)	7/29/2002 1:51:39 AM
From: BelowTheCrowd	Read Replies (2) \| Respond to of 186894

> Startups operate at a JIT mode, so the data is current, but how responsive are large companies and how quick do large companies respond to field data? Any data that's older than 4 weeks is plain old. < The problem with reacting to data on a weekly basis is that often you're just reacting to noise. The sales cycle for most large systems to large clients is anywhere from 6-18 months. It's quite typical to have lots of starts and stops during that period for lots of reasons. A company that is trying to discern a trend from just a few weeks of data is wasting their time. A company that doesn't have a strategy going out a year or more is just flailing around. They dotcom-era myth that plans and strategies were not important because everything changed too fast turns out to be just a myth. A good strategy, based on good understanding of the customer, the competiton and your competitive advantage is not one that should be changed with every minor change in sales data. > Additionally, high-tech startups may also show a here-and-now indicator on the health of other sectors of the industry. < To some degree yes, but to some degree they are nothing but an indicator of the health of high-tech startups. First. It is quite possible for a company, even an industry, to be doing quite well but not to see any hugely compelling reason to spend money on technology, especially if they have more pressing and immediate concerns, like the need to revisit and recertify all their financial results for the past few years before August 15th. Second. In "normal" times it was understood by most that startups would mostly be selling to smaller businesses and other "trial" clients. Only during the dotcom era did people suddenly expect that large conservative clients would buy stuff from startups. In the old days you never got fired for buying IBM. Today the list has expanded to include Microsoft, Oracle, Siebel and a few others, but startups are most definitely off the list at most companies. For a startup to sell to a large customer right now would require them to have an amazingly unique and compelling product, not just "better." Most of them don't, and most of them aren't selling. This is a return to reality, and not necessarily an indication that the world is ending. > It would be rather presumptuous to assume innovative types aren't spending their days (and evenings) talking to people and customers outside of their field. < Yet I have seen this at three different startups. Boards of Directors made up entirely of people from the software biz. Marketing VPs who spent all their time talking to other marketing VPs and to "software analysts" about what technology wouldd be "hot" and about how to "spin" the product best. Product development people who presumed that they knew what the world needed, and that listening to a customer about their "points of pain" was a waste of time because after all, their job was to outsmart the customer. A hugely incestuous industry that to a large degree is insulated from the real world. This too is mostly fallout from the dotcom era, when many people were led to believe that people WOULD buy and use anything they could come up with, and that if the customer didn't agree it was fine to just "fire" the customer because your genius should have been obvious. So, what does this mean to larger companies: * For larger tech companies it is probably a mixed bag. To the extent that Joe's Software isn't getting orders because IT managers are playing it "safe" and buying Oracle, it is probably good for Oracle and other large "safe" software companies. To the extent that Joe's software problems are reflective of an overall decline in orders, it is a problem for the big companies. I believe both of these factors are coming into play right now. * For larger non-tech companies it is also a mixed bag. Cuts in technology spending in order to allow them to focus efforts on more important initiatives is not necessarily bad, so long as they can make the cuts without seriously harming their compeitiveness. That appears to be the case right now. To the extent that they are shifting their purchases away from startups, there is also some good, in that they are unlikely to be "burned" by new, untried products. There's another thing going on that is most certainly impacting tech spending and that's the huge changes in the accounting/consulting world. Lots of small to mid-sized software companies depend on their "consulting partners" to do a lot of the PR for them in the field. Certainly the ones I've worked for were VERY dependent on the consultants for bringing in new sales. With the consulting and accounting companies in disarray and realignment, I think it's not unexpected that technology sales by smaller companies are having troubles. This may be less reflective of the reality of the economy than it is of a problem in many startups' sales strategies. Bottom line is I think it's taking a great risk to extrapolate a small set of data points (the very recent sales of high-tech startups) and drawing conclusions about the economy as a whole. That said, I think large companies (both in and out of tech) remain richly valued and would not be surprised to see further contraction even if the economy does well. mg