Disturbing Data, Possible Parallel for Search
October 30, 2008
After wrapping up another section of my forthcoming monograph Google Publishing technology for Infonortics Ltd. in Tetbury, England, I scanned the content sucked in by my crawlers. Another odd duck greeted me with the off point headline “Outlook: Don’t Panic It’s Not 2001” here. (This is a wacky url so you may have to navigate to the parent site www.commsdesign.com and hunt for the author Bolaji Ojo.
For me, one telling paragraph was:
In 2001, for instance, the wireline communications equipment market sank 18 percent to $69.6 billion, from $85.3 billion in the previous year. Semiconductor sales to the segment tumbled 37 percent on a combination of sagging demand and severe pricing declines. Seven years later, wired communications equipment sales have yet to recover to the 2000 level, and estimates indicate the market won’t bounce back fully until sometime in the next decade. ISuppli expects 2009 wired communications sales to be approximately $76.6 billion, improving from an estimated $72.5 billion in 2008, but still below the record 2000 figure of $85 billion.
Source: http://thesaleswars.wordpress.com/2008/02/
Another interesting point was:
The entire semiconductor market wasn’t as fortunate. Chip sales plunged 43 percent in 2001, to $101.8 billion from $178.9 billion in 2000, according to the Semiconductor Industry Association. The industry resumed growth in 2002, but it wasn’t until 2004 before global sales finally crawled past the previous record. By then, dozens of semiconductor, passives, interconnect and electromechanical companies and electronic manufacturing services providers had disappeared, some merging with stronger rivals. A few others went under, unable to finance operations as customers froze purchases or exited the embattled networking equipment market.
What these data suggested to me was that the search, content processing, and search enabled application sectors may face significant revenue declines and could take years to recover. The loss of companies that have no revenue is understandable. Funding sources may dry up or cut off the flow of money. Large firms may shed staff, but these vendors will, for the most part, remain in business. The real pressure falls on what I call “tweeners”. Tweeners are organizations that are in growth mode but the broader downturn can reduce their sales and squeeze the companies’ available cash. Slow payment from customers adds to the problem.
The impact in the “beyond search” sectors will extend outside the perimeter of individual companies. Conferences, ad supported digital and “dead tree” publications, some consultants, and other parts of the ecosystem that thrives on search may take a hit.
What are the options?
I don’t have too many bright ideas. The first place to look for relief may be to innovate. The need to “pull a rabbit out of a hat” might explain the Delphi Group’s new innovation practice. Vendors can look for adjacent markets and reposition exiting technology to solve a problem, not impose a massive “platform” on a customer who may have a perfectly good platform and, therefore, doesn’t want another one. A third option is to perform a non-cash merger. I wrote about the Lexalytics-Infonic tie up here. This might work for some vendors, conference companies, and “dead tree” publishers. Consultants may find teaming useful as well, but unless the consultants have a pedigree, the risk of depending on a consultant who could fumble the ball is too high for my taste. I think that some organizations will fold their tent, load their donkey, and move on. The cost to build, market, and maintain a content centric product or service is high, often higher than entrepreneurs or “intrapreneurs” believe. The unrealistic cost assumptions may result in semiconductor type of shocks.
If so, the recovery period may extend over years, many years.
Stephen Arnold, October 28, 2008
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