A whole new experience in Silicon Valley

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The Independent Online

In the old days of the new economy, when everyone had fancy cars and overpaid jobs, trying to get down Highway 101 from San Francisco to the rest of California's hi-tech business park was like spending a Bank Holiday Monday in an Ikea car park. Now, however, as redundancy notices sweep through the Valley, the roads are beginning to free up. In January, a friend was leaving home at 6.30am to do a local commute. By early May, she was leaving at 7.30am and still getting to work on time. By late May, she wasn't leaving the house at all – another jobless contributor to urban decongestion – but, if she could afford the petrol, she reckons today's driving experience would be sheer pleasure.

These visible signs of an economy in freefall are part of a confusing mix of indicators that confront the information technology industry. More than for any other sector, companies investing in IT are keen to know what their peers are doing.

Certainly, cutbacks in IT are happening, but businesses have not stopped spending altogether; they are just taking a long, hard look at priorities. The industry as a whole, meanwhile, is coming up with a welter of creative ways of getting funding for IT.

AMR Research, a firm of analysts,recently suggested that companies should pick over the wrecks of washed-up dot coms for IT bargains: "The spoils of the dot-com demise are there for the taking and IT managers are finding bargains galore. Good, solid, equipment, servers and routers can be had for 10 cents on the dollar in the wake of the dot-com meltdown."

So, Silicon Valley has rather a lot of wrecks to choose from, but companies can find other, less desperate, ways to lessening the impact of spending. On a recent webcast run by Onyx, a supplier of customer-management software, Eric Schmitt, a senior analyst at Forrester Research, made a few suggestions on how IT spending could be made more palatable to the finance department.

One option was to turn capital expenditure into operating expense – by signing up to a software rental scheme with an "application service provider", perhaps, or by buying software licences on a monthly basis rather than as a one-off hit. Another was to see which other parts of the organisation would benefit from investment and get them to cough up a contribution – an interesting twist on the usual interdepartmental game of passing the buck. On an even grander scale, Mr Schmitt suggested users look at cross-company initiatives. Could a distributor of electronic goods, for example, share with the manufacturer the cost of investing in software designed to reach the customers?

This kind of approach is a logical evolution in the industry, although it is not entirely clear whether users of IT are ready for it. If customer management is about forming a deeper bond with customers, collaborative commerce is a whole new experience that embraces everyone in the supply chain. Based on a combination of trust and self-interest, it offers huge potential benefits and a lot of potential hiccups, from both a technical and organisational perspective. But, as Mr Schmitt says, it makes sense – and it is already happening. Sharing knowledge across and between enterprises is the way of the future.

This column is provided by TBC Research, an events, publishing and research company. Contact www.tbcresearch.com