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Is enterprise IT in danger of a tech bubble?

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Everywhere you look these days, from the New York Times to this blog, folks seem to be talking about and warning about another potential tech bubble. Do you think this is becoming a problem with enterprise tech?

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  • Bubbles are driven by two factors: available cash seeking leverage and emotional buying trends. So far as I can tell recent upsides in IT companies are backed by solid financial analyses. Emerging technologies in IT are offering opportunities to invest in future revenue, however, the fact that there are few low-risk or insured opportunities to leverage money at a rate that beats inflation means that it will seek more speculative means. So, more money may be flowing toward this emerging technologies area than seems reasonable, but in contrast to 1998-2001, it's not based on irrational returns.

  • I think Information Technology is nowhere close to a bubble situation. Consumer adoption and investment from a technology perspective still exceeds that of Enterprise. It is actually getting more uninteresting to be in the enterprise tech business rather than bubbly :-)

  • It may not be a direct problem with Enterprise Tech but indirectly if the bubble bursts with the whole social software/ social networking scene then we have a problem since today's IT companies are scrabbling around trying to emulate the consumer success of the likes of Twitter and Facebook in their own products.

    If you look at the dependency of Facebook's "Like" button, or Twitter's Retweet, and either of these sites go down it literally stops the net from functioning, and blogs/ news sites etc just grind to a halt.

    If there was a meltdown of the social sphere and the tech scene became introverted again then you can bet your bottom dollar or last pound that enterprise software companies will quickly begin to decouple and descope those features in their products, and for existing customers and installations this will be a big problem, not just in terms of infrastructure but also reversal of attitudes towards that kind of tech.

    So, is the tech bubble a worry ?
    Yes, but it depends on which tech bubble bursts.......

  • There is a feeling of another Tech Bubble out here in Silicon Valley, but it is definitely not in enterprise IT but in consumer IT.

    Cloud, Social, Mobile are the 3 key words.

    Groupon is leading the charge with a heady valuation. Twitter's latest funding round valuation was 'interesting' and LinkedIn is limbering up for an IPO.

    This blog http://socialcommercetoday.com/bubblicious-1-5bn-investment-in-social-commerce-startups/ highlights the $1.5bn that has been invested in social commerce startups.

    For enterprise IT you need to add "Rapid Growth" to the list. (BTW - apid = 70%+ revenue growth).

    So Cornerstone OnDemand, a Cloud HR player, just IPO'd at 15x trailing bookings (not revenue). Salesforce is still on a tear.

    Where and when will it end? There seems to be a great deal of money available chasing too few IT companies at the moment, so it is anyone's guess.

    What is clear is that again there will be some big winners and a lare number of small losers.

    Gentlemen - roll the dice

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    Enterprise Tech Bubble is different from a Consumer Tech Bubble. The article and the blog seem to refer to a Consumer Tech Bubble (facebook, linkedin, twitter kinds of companies). In the enterprise do we see anybody needing LESS technology and LESS programming than before? I don;t think so. They are all struggling with too much to be done and not enough money to do them with. This only points to continued health of Enterprise IT. The Consumer Tech may be in a bubble but not Enterprise Tech!

  • No.

    As is often the case with technology we're talking bubbles and focusing on consumer issues. Long before there was Facebook and social media and Like buttons there was integration, supply chains, and just-in-time manufacturing. The internal processes and functions of a business and how business does business are all technology-enabled today and even if the consumer bubble bursts the back-office technology is going to continue to move forward.

    The last bubble did not make an impact on core enterprise IT because core IT isn't consumer facing, it's internal and partner-distributor-supplier facing.

  • NO! - it’s not about any bubble – it’s about adapting to the latest trends in the information provider/consumer patterns and making the necessary changes which enterprises can effectively use.

    The problem with enterprise IT is that it evolved and gained acceptance within its own four walls. As we see, later on it got extended to accommodate their immediate partners. As we see today the big monolithic enterprise blocks are more and more depending on the concept of say a distributed supply chain management - where the players are increasing by the day and the enterprise may or may not have a control over them. In the same way the enterprise products/concepts that have been around for ages and have evolved from satisfying the needs of those confined requirements may not necessarily be able to cater to the demands of a more open and interactive environment.
    Say for example in the CRM space with the wide acceptance and success of social media and mobile apps it is amply clear that there has been a paradigm shift in the way information is produced and consumed.

    So its all about alignment...

  • There is an indirect danger similar to the year 2000 when people from busted dot-com companies entered enterprises and promised to develop in-house nice-web-dynamic business apps. Those apps were (and still are) rather difficult to maintain.

    Now I smell “mushrooming? applications which are developed and maintained by a single person (without any collaboration with the IT department).


  • The vibrancy of the tech start-up community here in the valley is a good sign that innovation continues at the staggering pace we've become used to. VC's and Angels tell me deal flow is high and there is plenty of cash to invest. And while this might seem like it's fueling the bubble it does mean that we can expect to see game changing products and services for the foreseeable future.

    A more worrying trend, for me at least, is the anti-competitive, bubble bursting consolidation of the major players. Every day it seems IBM, Microsoft and the lesser gods Oracle, SAP, CA sweep up another thriving business into the their homogeneity. The sad result is bland technologies aimed at a mythical normalized IT environment. These bloatware, everyman technologies limit innovation and drive solutions towards average.

    Find the best tools! Demand technology that liberates and delights. Don't settle for standard in a non-standard world.

  • I agree that sound enterprise IT offerings that solve business problems shouldn't be threatened by the bubble. But they will be.

    The problem for all IT offerings (as it was a decade ago) is that anything associated with "technology" will be tarred by the same brush when overpriced social media technologies go through their inevitable valuation corrections (Facebook $50B, Zynga $10B, Groupon $4.8B, LinkedIn $2B, Twitter $4.5B, etc.).

    Enterprise IT may not fall as far or as hard as social media, but they will slip and founder for awhile. A falling tide lowers all boats.

    Buffett cautions social-networking investors

    • A major difference between then and now is the Cloud. The CAPEX expenditures are almost non-existent and the # employees running these rapidly growing behemoths are minimal. If they go away, they don't leave a wake of individuals straddled with useless stock they still need to pay taxes on and they aren't leaving a wake of unemployment. If whatever this is were to go away tomorrow, the relative impact to the market would be minimally recognized.

  • TIBCO announced 1st quarter results yesterday. TIBCO is certainly an interesting indicator of the health of our particular sector (BPM). TIBCO's chairman and CEO reported their strongest quarter of license revenue in 10 years, of which $7.7 million corresponded to their BPM product line - not bad.

    But is it worrying that TIBCO is trading at 57.3x P/E with a $4.3 billion market cap? That certainly seems high to me. Just as a reference, Apple trades at 19.57x and IBM trades at 14x. Of course TIBCO is still considered a small company compared to those two examples, undoubtedly with lots of room to grow, but still 57.3 P/E? Bubble?


  • I don't see the evidence for a tech bubble, overall, but there are areas where things have gotten a little fast-and-loose. The markets are incredibly punishing for any failures, however (ask RIM), and as a result, I don't see too many lofty valuations relative to traditional measures like P/E...

    Early stage investing is better funded than it has been in a while, but late stage funding is actually more anemic. So there are some conflicting signals. In any case I don't see any bubble behavior in the enterprise space AT ALL.

  • I certainly hope it wouldn't but I wouldn't really count it out. Seems all the numbers put up solid analysis but so far all it takes into account are those within relatively adjacent, closely connected markets and industries much like tech on tech effects.

    Enterprise IT has been quite stable but then ever notice that much of everything else is in a state of societal and environmental flux? And I'm least confident that common sense remains calm in the face of imagined chaos.

  • The rule is that there is always a danger or a risk. A risk of Tech Bubble is no exception to the rule. However, I do think that the probability is of realiztion of this risk is low. If we compare current Enterprise IT to the Dot Com bubble in 2000:

    1. One Technology domain (Web) in 2000 vs. three (Social Computing, Cloud Computing, Mobile) today.
    2. Every idea/solution with the right acronym is acceptable in 2000. Everybody is talking about Facebook but anything new about few years ago market leader Myspace?
    3. Most Enterprise over estimate Cloud Computing Security Risks. The result is current Public Cloud implementations are mostly SMBs are non-Core Sysytems (read SaaS is going Mainstream http://avirosenthal.blogspot.com/2009/01/saas-is-going-mainstream.html ).
    5. There is a sound economical model supporting Cloud Computing and Mobile implementations. No such model was available behind e-commerce implementatios of 2000. Actually, current Social Networks are in a sense a gradual and evolutionary model of the Dot Com 2000 e-commerce implementations.

    To summarize there is plenty of Hype but no tech Bubble.

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