Do we get another dotcom bubble burst
Dieter Weisshaar • May 15, 2023
Foto von Casey Horner auf Unsplash
Is the IT market crashing?
If your are old enough, you have seen the rise of tech companies at the end of 90th of last century. Web Content, eCommerce and startups were the exciting topics, til the point when the dotcom bubble burst. It was the time when salaries went crazy in this sector, the company evaluations and stock markets were on all time high and venture capital market
was overheated.
It was the time when IT experts
in new technologies were rare. Most companies wanted to have a digital or e-commerce strategy. The baby boomers were between 30-40 years old. It was more an education and skill problem than a resource problem. When the markets imploded there was a pretty large labor force available and unemployment rates in the EU were around 5-10%. After the burst, it was pretty hard for the highly paid experts to find new jobs and unemployment was going up.
That is different today. Todays war for talent has a resource issue as well. Experts on new technologies are as rare as always but we have a large proportion of the baby boomers retiring in the coming years and the pool of talents available to be educated in new technolgies will shrink. Hence we will not face a massive unemployment effect on IT Experts as in the early 2000th. High skill Tech Labor markets will remain tight. On the other hand there is an opportunity as new technologies such as AI in coding software may boost productivity.
The situation on the capital market is only slightly different. Companies in the late 90th of the last century were evaluated high and IPOs provided a lot of cash to the tech companies. A lot of companies were cash burning and when the stock markets crashed, and the cash was spent, the companies went either bankrupt, got sold and restructured. Hence a lot of IT experts were released. That is pretty much the same as today beside the labor market absorbing the IT experts. On the other hand stock markets so far have been pretty reliable despite the war and other crisis. There is still enough money in the market which is looking for good investments even if due to interest rates alternatives are available. Source
But if you don't have a cash generating business model, it is getting far harder to get additional funding today. That will put company evalutions under pressure as some of them will be on firesale. Companies which are not depending on a cash injection are facing a high demand for digitization and that will most like continue to improve efficiency at customer side to stay competitive or creating new digitized business models.
Despite the continued demand for digitization
there will be a slower growth
as companies adopt their investment
in an upcoming recession Source typically. That will force tech companies to build pipeline differently and cause larger efforts to create growth.
Take away: Based on these observations and when the recession will be as mild as expected, there will be most likely continued growth
in the market for digitization projects based most modern technologies and skills. The labor markets will remain tight and the war for talent continues. New technologies
as the adoption of AI is causing productivity gains on the IT and the business side. Cash burning businesses will be under pressure
to restructure and seek fundings if they haven't got a superior business model or technology. Tech experts released will find a new job easily. All of this will most likely not cause the same massive bubble burst as in 2001 ff.
Safe Harbour:
This blog may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent the current opinion on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these statements, or base any decision on this blog, which reflect the opinion only as of the date of this presentation. Please keep in mind that the author will not obligating himself to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
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