Netrics HD

All industries are feeling the effects of the current economic recession.  All industries are interested in the many benefits of innovation.  However, in the technology industry, not only is it a significant interest, innovation is the driving force and lifeblood of a rapidly evolving sector.

Historically, many of the most powerful new trends in technology originated from small entrepreneurial ventures.  Small technology vendors tend to be specialists with a narrow focus that can provide a great source of innovation.  Small vendors are usually less financially stable and rely mainly on funding for their early survival.  However, the current economy is limiting venture capital opportunities.

Large technology vendors tend to innovate via acquisition of these smaller vendors.  A continuing trend in information technology is the consolidation of acquired functionality into enterprise class application development platforms with integrated components for data quality, data integration, master data management and business intelligence.  This allows large vendors to offer end-to-end solutions and the convenience of one-vendor information technology shopping.

However, further innovation is typically delayed while the vendor prioritizes integrating the acquired technology into the existing suite of products and integrating the acquired people into their existing staff.  Additionally, training programs and sales strategies must be adjusted to reflect the updated platform and product offerings.  All of this requires significant time and effort.  The collateral damage is innovation can lose momentum or become stagnant.

Even before the economic recession, many in the information technology industry expressed concern about the effect of this vendor consolidation on innovation.  Now with the economy starting to claim some promising start-ups, are we looking at an innovation recession?

Of course, the situation is more complicated than small vendors vs. large vendors.  Vendors of all sizes are struggling with finding viable business models to pursue possibilities such as cloud computing and software-as-a-service (SaaS).

The trend with most innovations is that early adopters often spend more than they earn in these pursuits.  Innovation is often high-risk with no guarantee of high-reward. Entrepreneurial start-ups are usually more willing to go “all-in” and risk everything, but again venture capital is currently hard to come by.  Large vendors have more financial stability, but in a down economy it is often better even for them to play it safe.

Everyone wants to do more with less.  But some are settling to simply do less – long term (or even medium term) this is a losing strategy.  Innovation often stimulates the economy but the paradox is that an economic recession both spurs and suppresses innovation.

With many information business technology professionals feeling forced to find a way to survive, has do more with less become do without innovation or is it truly do with innovation?

My belief is that it’s the latter.

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