What is the state of the technology community at this point? Has the job market dried up? Has the venture capital market dried up? Is e-business dead? These questions are not as easily answered in an objective way as it might seem. Oh, there is lots of data out there. But a statistician friend of mine told me one time that if you squeeze the data hard enough it will admit to anything.
A new report from the AEA (American Electronics Association) entitled Cyberstates 2001 provides some of the data:
The data doesn’t support a slowdown, since it reports there was a nationwide growth in high tech industry employment of 234,800 jobs in 2000 over 1999. The rate of growth, however, was down slightly in selected segments. For example, software and computer-related services jobs grew by eight percent between 1999 and 2000 while this same rate has been in double digits year-to-year since 1994. In the years from 1994 through 2000, high tech employment has grown at the fastest rate of any business segment (38%) and in total employment is third overall, trailing only the construction industry and the financial services industry.
High tech wages also grew dramatically in the period of the study, increasing 30% between 1994 and 1999, while private sector wages overall increased by 12% in the same period.
This bright picture of the high tech industry may seem out of line with what “everybody knows.” Since AEA is the major high tech lobbying group in the United States, perhaps there is bias in the data to present the industry in the best possible light. William T. Archey, President and CEO of AEA, responded to this challenge when he presented an overview of the data in Bellevue, Washington in June 2001. He said their position required them to be conservative with the data in order to have credibility. Any data that couldn’t be fully substantiated was rejected, he said. I guess that means there were no “hanging chads.”
In a conversation with Archey, however, it is apparent that the numbers are vastly undercounted. Only employment and wages in specifically classified “high tech” companies are included in the numbers. Jack Welch, CEO of General Electric, was recently called e-Jack in a CSPAN interview, because of his focus on transforming GE through information technology. The conversation with Phil Condit (elsewhere in this issue) confirms the increasingly strong role of information technology and IT workers in an “old line” manufacturing company like Boeing. But the growth of high tech workers within companies like GE and Boeing was not included in the study.
While Archey recognized the importance of this segment of high tech growth, he argued that he did not know how to measure it, and hence it was not included.
Another explanation for the disparity between the perceived slowdown and actual growth may come when this data is compiled for 2001 next year. There is little doubt that many segments of the high tech industry are indeed slowing. Informally, many colleagues hiring high tech workers have reported getting several qualified resumes for an open position for the first time in years. What about the availability of venture money for high tech startups? In this case the data would show less investment than in 1999. But is this truly a decrease in investment in technological innovation? A distinguished panel at the recent CTO conference sponsored by InfoWorld argued this point on June 21 in San Francisco. Participating were Scott Darling (eBusiness Ventures, Intel Capital), Steve Jurvetson (Draper Fisher Jurvetson), and Bob Lisbonne (Crosspoint Venture Partners), chaired by Ariff Quli (InfoWorld media group).
They agreed on some broad issues. Yes, the dollars are down. However, dollars for technological innovation are not down at all. The venture community over invested in businesses that were not truly “high tech.” The investment for “dot com” grocery delivery, for example, is a huge investment in capital costs for trucks and warehouses. The web front end is a small part of the overall cost. This type of investment might best be left to the grocery business sector when such delivery shows the type of value that would cause people to pay for it.
Their advice for people looking for investment in their high tech business? Come up with a truly innovative idea, rather than a trendy hot topic, and show how to get to a viable business. They have enough money to fund the good ideas, but not enough good ideas. In other words, back to the basics of business.
Where does this leave e-business? Barb Gomolski argues in InfoWorld (June 18, 2001) that it is time to drop the “e” from e-business. Yes, technology will play a big role in business in the future, but it is still about having a business plan, making a profit, and taking care of customers. So we shouldn’t make the distinction.
I agree in part. It is just business. But e-business reminds of something very important. Technology is changing at a very rapid rate, enabling new things. In five years, what this technology will enable in business will be very different from what we are calling e-business today. If forgetting about the “e” in e-business causes us to lose track of how the continued technological change will continue to drive business change, then it is a mistake.
It is clear that the technology community is going through a shakeout. When things are changing as rapidly as they are, and when we have just come from the insane “dot com” era where we lost track of the basics, this is inevitable. We will not go back to the green eyeshades in business, but neither are we going to stay in what we now call e-business. Change of significant magnitude and structure will continue.
Al Erisman is executive editor of Ethix, which he co-founded in 1998.
He spent 32 years at The Boeing Company, the last 11 as director of technology.
He was selected as a senior technical fellow of The Boeing Company in 1990,
and received his Ph.D. in applied mathematics from Iowa State University.