Dotcom pain is blue chip gain

The shake-out in technology stocks will change the rules of engagement for traditional firms, writes David Bicknel

The shake-out in technology stocks will change the rules of engagement for traditional firms, writes David Bicknel

Reality hit the dotcoms at the end of last month. As the financial market bubble burst, wiping hundreds of millions of pounds from stock market valuations, the world also changed for traditional companies. In both the US and UK, a series of initial public offerings (IPOs) were pulled.

The shake-out will change the rules of engagement between buyers and sellers of e-commerce-enabling software. Instead of having to suffer the "take it or leave it" approach from e-commerce product suppliers, IT decision makers can perhaps ask more questions, even strike a harder bargain.

According to Michael Keany, UK general manager of digital consultancy Viant, suppliers are going to be more amenable to forgotten queries about customer service than they would have done previously. "There are some chastened companies out there now," said Keany. "The aura of infallibility that many e-commerce companies believed they had may no longer be there. Now, if you are an IT director, you can be more aggressive."

"The traditional IT companies like IBM and Andersen will certainly benefit from the stock market dip. It enables them to encourage would-be buyers to choose a safer option. We are almost back to the no one got sacked for buying IBM scenario. In times of trouble, you are more likely to stick with a brand you know. It would be worth issuing an RFP (request for proposals), and ensuring that a couple of your more traditional companies are on the shortlist."

The balance has also shifted in the e-skills market. Previously the dotcoms were able to use their venture cash to pay crazy salaries and offer pre-flotation stock options. With flotation delayed or cancelled, and stock values down, now may be the time to lock in the best staff.

"Maybe it is now worth trying to put together a package to keep your best staff, to craft a job that gives them the feel of working for a dotcom company, without actually doing so. They might be persuaded that the grass is not always greener on the other side," said Keany.

For dotcoms, delivering to budget will start to matter. "There have been companies that missed their numbers, and then saw 40% of their market value disappear in one day. We have all been chastened by these events. When the going gets tough, we all have to start acting a little more like traditional companies," Keany added.

For traditional companies moving online, the immediate action points after the stock market slide are:

  • Re-look at relationships with software suppliers.

  • Scoop up and lock in staff shaken out of dotcoms.

  • Start running the rule over start-up competitors in your sector.

  • Read more on IT for small and medium-sized enterprises (SME)