The slowing US economy has affected every business in some fashion, but if your company has anything to do with technology, it’s been like a double-whammy. Beginning with the dot-com busts, the perception with a lot of high-tech companies was, will they be around in six months or a year?
More important, the slowdown has forced companies that were once rolling with the longest economic boom in history to analyze their costs. It turned out that some companies were throwing lots of money at technology without analyzing its benefits to the company.
"I think they will spend their money, but they won’t spend it like they used to," said Carl Bauman, co-owner of Hampshire Company in Milwaukee, which makes touch-screen controllers and drivers. "People used to buy software for dopey stuff. They’d outfit an entire office with brand new software that people had no chance of ever learning or using.
"I think it’s bad business," Bauman said. "It’s people making decisions to buy things to increase productivity that they really had no capability of implementing, but they had the money, so they went ahead and spent it anyway."
David Koscinski, president of The Gecko Group, agrees. The Milwaukee company helps other clients leverage technologies such as Lotus products better, as well as project management, intranet and extranet applications development and network administration, among other things.
"I remember when we started the company (in 1998), projects were sometimes done because they made someone’s job easier in that real, sort of fuzzy, intangible way," Koscinski said. "Now, making someone’s job easier isn’t enough. It’s ‘How much money can I save or how much revenue can I generate?’"
Koscinski started his business at the top of the tech craze and has only seen it go down, although he worked for an outside consulting company during the halcyon days of the tech boom, too. He expects clients to remain focused on the return on investment (ROI) of initiatives over the next six months, which is to say, not much is going to change except that companies are looking for ROI on a much shorter time line – six months to one year – than before.
Koscinski says he relies on his customers to keep him apprised of what’s going on in their worlds. His own observations: Customers have initiatives but they still put them off because they don’t have the resources (people) to execute the plans, and because money is tight, many of them won’t outsource those projects.
Another classic knee-jerk reaction in a down market is to cut costs in a company’s marketing efforts – things like brochures and ad campaigns. It’s knee-jerk because companies fear losing business and at the same time they cut costs in an area that can help in securing new customers or maintaining current customers. So ad agencies, graphic design firms and printing companies start feeling the squeeze before some other industries.
That’s especially true in a conservative business environment like Wisconsin, says Erica Gorsuch, of the Retso Group, a Thiensville-based design, training, repair and staffing company specializing in Apple MacIntoshes. Gorsuch noted that her business began slowing down last summer, but expects things to turn around in the last half of this year.
"I’m confident that, within the next six months, we will at least get back to the point we were at pre-summer 2001," Gorsuch said, noting that several clients that had made cuts in their marketing budgets are back, and companies that had postponed routine maintenance are scheduling work, too.
"I almost wonder if that’s not an indicator that people are still struggling, and they’re finally deciding that doing nothing is not saving them money – it’s costing them money," she said. "And they’re at that point where they say, ‘Look, we have to spend some money to make some money.’"
Another indicator for Gorsuch that the economy was going south last summer was attendance in their software training classes.
"I think training is an area that companies are willing to cut back in order to save money," Gorsuch said via e-mail. "It’s a bit short-sighted though, because if you send your staff to a course on OS X or the new versions of Illustrator, Photoshop, Quark, Dreamweaver, GoLive or Flash (all came out with new versions in the last three months), you can increase productivity and decrease the time spent by employees trying to figure out the new features of software and the time spent teaching it to each other."
Hampshire Company suffered in the last quarter of 2001 and the first quarter this year from customers that cancelled or postponed orders.
"It’s odd to me, that industrial controls could do a 180-degree turn within six months," Bauman said. "Our customers around the world, they stopped taking delivery of stuff, but they never stopped talking to us. They didn’t stop projects; they just kind of slowed them down. … By the time we actually came to grips with the fact that business might not be what we thought it’d be, it had turned around already."
July 5, 2002 Small Business Times, Milwaukee
