Communications and the Economy

Please note this post was written approximately one week ago — before the news of the bailout bill failing began to spread fear in the financial markets. Stay tuned to learn how the financial markets will affect communications and technology.

Many people asked me recently at ITEXPO West 2008 Los Angeles, what I see happening in the communications market from an economic perspective. Let’s just say that on the way to the show, I was watching TV as the stock market plunged and there was talk of another Great Depression. When I got to the show I must say I was unclear how the financial markets would affect the communications space.

After speaking with many people in our markets, the end result is most people believe the space is very strong and in fact some companies are seeing increased sales of their solutions as a result of travel cutbacks and high fuel costs. It seems if you sell products which increase productivity when corporations are belt-tightening, you are in good shape.

In fact the attendance at the show was very strong. I feel we would have had even more traffic if there wasn’t as much fear in the financial markets. What really made it an interesting week was when I turned on CNN; I thought I was on CNBC. The coverage was 100% financial, all the time. In such an environment, people probably have trouble leaving the TV. Even the news anchors on CNBC who typically leave in the late morning were at their desks until after midnight.
Certainly TV stations feed on this viewership and seem to ensure they position the news in such a way to ensure it is self-perpetuating – but this is a topic for another day.

The tremendous focus on negative financial news from the general media led to the stories I heard of hedge fund redemptions leading to lower industry stock prices. In addition, a general theme in our markets and beyond is companies pausing more before signing contracts. There is more indecision than at any time I remember. Companies want to reinvest in their businesses but they seem to just be waiting more than they used to.

In my opinion, in order to counter this delay in contract signing, we have to work harder and/or smarter, making more sales calls and doing more marketing. Sales after all is a numbers game when all else is equal. Now is when companies who are good marketers will take share from those who are good engineers. It happens every time the economy slows and this time will be no exception.

In fact, companies who used to rely heavily on existing companies to fuel their growth by supplying solutions to a growing workforce are going to have to shift to customer acquisition. Companies are not adding as many employees as they used to which means growth has to come through competing for new customers.

If you work internally, you need to spend time selling the productivity benefits of the solutions you propose purchasing. In some cases, vendors will work with you on financing (assuming there are banks left when you read this) who can ensure a positive ROI from day one of the investment.

So my final response to financial question in our markets is that if I had a choice of industries, I would want to work in one where our products help companies save money. Moreover, I would want to work in an industry which has little excess and has already seen its bubble burst years back. I do believe communications is a great place to be and new technologies like UC, mobility and telepresence make companies stronger and more productive and in a slower market, these are the things companies desperately need.

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    Communications and the Economy

    Yesterday at Interop I asked exhibitors and analysts what they were hearing about the economy. Most said they think the recovery would be U shaped, not a V but some thought that Q3 would be the start of a recovery.

    Interestingly it seems the companies who are marketing aggressively are doing better than the quiet companies who have basically turned out the lights and are hoping for the best.

    An example of the former, Interactive Intelligence – a company reporting record profits — was cited here yesterday.

    I have to admit that I believe the housing market is still inflated and has 30-40% to drop. I am no real estate analyst mind you but it seems the run up was too fast and we haven’t seen that much air taken out of most of the market.

    If I am right — this drag on the economy could be offset fairly easily. We need an increased focus on public works. Basically repairing the infrastructure of America. Our bridges and roads are a mess and we need to hire many people to fix these problems.

    This is akin to the New Deal which was how we got the economy back on track after the Great Depression.

    One point that does tie unified communications more closely with the economy is a conversation I had with Jay Burrell and Kendra Petrone of Nokia and Chris Thompson of Cisco. Jay told me in a few of his recent meetings, CIOs are telling him they need UC because employees can’t afford gas and they want to work from home.

    So UC it seems is becoming a way to offset high gas prices. If you add this to long distance savings brought on by VoIP, communications technologies are in a great position to be boosted by a slow economy and soaring gas prices.

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