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How the stock collapse really affects you

By Fred McClimans
Network World Fusion, 03/19/01

Forget for a moment that the people behind Internet ventures like CMGI are no longer the zillionaires they were a year ago. The continuing slump in the U.S. economy is starting to affect the pace of new product development at existing (or should I say, surviving) networking vendors.

The reasons are fairly simple and predictable once you stop hyperventilating over the collapse of NASDAQ. First, lower sales mean less cash in the corporate coffers, which in turn mean less money for new product development.

Second, lower stock prices mean money is harder to acquire on a loan/credit basis, which means vendors are less likely to undertake major new product efforts with borrowed money.

Third, an economic slowdown means more existing equipment still sitting on the shelf, which means it takes a vendor longer to make money on existing gear - and so less likely to want to spend more money on new products.

Finally, a tighter economy always forces more conservative approaches to corporate management. Think about your own company - chances are, you've already gotten a memo or two on the need to be more "prudent," which translates into "don't take any risks." Networking vendors are in the same boat. Since even a minor mistake could be very costly, they're less likely to spend on new technologies that could take years to show a profit.

Further, vendors are more likely to try and spin-off new, innovative ideas sooner (with the help of outside venture money - which is getting harder to get) if they do not precisely fit the corporate plan.

So if you've been waiting for your favorite vendor to finally deliver on that hot new product they promised six months ago, you may want to reset your expectations, as well as your own network implementation schedule.