Downsizing dotcoms

Job losses and restructuring is the dotcom dream beginning to fade? David Bicknell reports

Job losses and restructuring is the dotcom dream beginning to fade? David Bicknell reports

There was always likely to be a post-Christmas shakeout in the dotcom world, and when organisations like Amazon say they are axing 150 jobs, we can safely say it has begun.

Amazon is not the only downsizing dotcom. Software retailer said it was going to "lose" 75 staff - about 20% of its workforce. Value America, a Charlottesville-based Net superstore, said it would eliminate around half of its 600 jobs. Fashion e-tailer announced last month that it would make 90 staff redundant.

Perhaps these losses are no surprise. There is so much competition in the dotcom arena that not all companies will survive. There will be difficult times, and dotcoms are no different from bricks-and-mortar companies in that restructuring may be a necessity. What is odd is that the word "restructuring" seems more applicable to large companies with a traditional make-up, than supposedly lean, mean dotcoms.

Insiders in the world of e-commerce say this shakeout is really no surprise. US analysts suggested the cutbacks at Amazon were simply an attempt to weed out those that were not performing effectively. Although the 150 accounted for 2% of Amazon's staff, that ratio is probably unusual for a technology or retailing company.

At Beyond, the 75 jobs that went in a shift from business-to-consumer to a business-to-business were mostly in its consumer division. The company, whose business is selling consumer software over the Net, will continue to maintain a consumer Web site but with minimum staffing. Beyond will now step up attempts to develop online stores for other merchants. It also wants to achieve sales of over $60m to government agencies, doubling its existing performance. The rationale here is that although margins on government business are not great, Beyond no longer needs a large sales team to win these accounts.

Andy Hobsbawm, chief creative officer at interactive specialist suggests that job churn will become a regular occurrence. "This marketplace is changing so quickly, with new entrants coming in with different value propositions, that it is no good sitting watching something develop in a way that might be allowed to happen in a traditional company. The pace of change is so great that, for every Internet strategy, there is an alternative plan - or a fork in the road - already in place. It may only be because there is a feeling 'on the street' - Wall St, that is - that a change in strategy is needed."

There is a moral here for European IT and e-commerce decision makers. Those who have been in those positions for longer have probably realised it already. Decisions in the e-world are being taken more quickly than could possibly have happened previously. For example, while due diligence of a merger or acquisition might have taken months, now mega-mergers are being completed with only a week's diligence in place. Often, decisions are simply taken with a gut feel, an instinct, that could, ultimately turn out to be the wrong one.

The biggest problem for bricks-and-mortar companies, warns Hobsbawm, is they are just not moving fast enough.

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