Once burned, twice shy. That could be the mantra these days when it comes to emerging technology.
In the wake of rampant investments in new technology products and firms during the late 1990’s and early 2000’s, Fortune 1000 (F1000) businesses are showing greater caution than ever when it comes to incurring potential risk. With tens of millions of dollars of software investments sitting unused, underused, or with companies no longer in existence, big F1000 buyers are looking to take the safe route.
As one F1000 CIO recently expressed it, “If we could buy everything from IBM we would, even if we had to wait a few years to get the functionality we needed”.
The implications of this new mindset for emerging technology firms and their investors are troubling. More and more large firms, even in an improved IT spending environment, are deferring investments in emerging solutions, or are taking the more conservative approach of choosing to wait for an established vendor to develop the required functionality.
Even in the instance of those emerging firms that are experiencing success in selling a new technology solutions, many are being compelled to execute the deal through a large systems integrator such as IBM Global Solutions. How did this state of affairs come to pass, and what can innovative F1000 firms do to mitigate the risks of technology adoption?
The period from 1996-2000 was a heyday for emerging technology companies. Fortune 1000 firms embraced enterprise software companies to address their needs for CRM, ERP and BPM, among other needs. In addition, the promise of the Internet as a new customer channel, and the challenge of Y2K, fueled IT spending.
Organizations consumed by Y2K found that they did not have the bandwidth and resources to cost-effectively build out internal applications when they could be purchased through enterprise software firms. In retrospect, this was a golden age for the software vendor.
However, the resulting IT spending frenzy resulted in a glut of solutions. F1000 firms over-bought. Venture firms over-invested. There was a supply that would far exceed the eventual demand. In many instances, there were multiple investor-backed companies founded to address the same highly specialized problem.
In the wake of the market pullback of 2000-2002, many F1000 organizations were forced to take a critical look at severe expense reduction and elimination of redundant technologies. Many organizations sought to put in place far more rigorous enterprise software standards. Understandably, this makes the challenge of emerging technology adoption all the more difficult. When risk mitigation takes precedence over technology innovation, technology innovators face a major challenge.