BoS weekly digest: correction, recession or depression, but there will be winners

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On the day the first world war started, Du Pont - the US-based principle supplier of munitions to Great Britain - doubled the price of gunpowder. By 1916, DuPont were making profits of $82m / year (some $2bn in today's money), up from $5m from before the war. Similarly, the profits of British farmers more than trebled in the four years that the war lasted.

In the great depression of the 1930s, Bechtel, Kaiser and the other of the 'Six Companies' flourished as they built the infrastructure of the American West. Building the Hoover dam alone netted them profits of around $15m ($200m in today's money).

Whether recent financial events are a short-term correction, or herald the start of a recession or even a depression, two things are certain.

Firstly, there will be losers. The web 2.0 froth will evaporate with its funding, and vendors of big-ticket, enterprise software will struggle as purchases of big-ticket items are postponed.

Secondly, and less obviously, there will be some winners. Some individual companies will do well, but so will entire sectors. In the high street, cobblers' profits are up as people repair their shoes rather than replacing them; low-budget supermarkets such as Lidl and Aldi in the UK are doing well at the expense of the more upmarket Marks and Spencer; sales of lipstick and ties will go up as people look for cheap ways to feel good.

So where is the silver lining for software businesses in the current crisis? Post here.

Back in April, Dan Nunan wrote a guest post on my blog entitled "What the recession means for the software business: five things to think about". It's well worth reading, now more than ever.

On the forums, Keith Maurino asks "How much free support is too much?". On the one hand, giving free support is a powerful sales tool. On the other, it can be a burdensome drain on resources. Where to draw the line? If you've got an opinion then post here.

If you want something to take your mind off the gloomy financial news then I recommend pizza and beer. If you want to eat, drink and discuss building long-term, profitable and sustainable businesses then there are groups meeting up in San Francisco and London.

Interested in building long-term, profitable, sustainable software businesses? Join the BoS social network.

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Comments

[Andrew Badera]

Infrastructure and maintenance spend will continue. Consulting budgets will open up, as businesses hesitate to commit to fulltime hires, and state governments go on hiring freezes. Not a great time for mISVs maybe, but a great time to be a meat and potatoes infrastructure consultant. You can't do without what you can't do without.

[Bob Cramblitt]

It's at these times that the most solid companies, with the best business plans and the best treatment of their people, not just survive, but thrive. They'll invest in extending their reach in current and new markets, hire great people who other companies have scared off, and provide a greater level of customer engagement. I've been fortunate to work with clients that have earned their greatest growth during recessions and busts. There was not a dot.com or Web 2.0 company among the bunch.

[Lisa P]

This is great damage to every citizen. They need stable jobs to support their needs. But, there is payday Loans come in handy if you are stuck in a sudden fix, and need a helping hand fast to keep you going until the next time you get a check. During times like this, a lot more people will need them. However, what is the difference between a recession and a depression? That kind of depends on whom you ask, and possibly how you ask. Recently, there was a question on Yahoo Answers where a user (a female) asked if someone could define recession, depression, and put the answer in “girly terms.” However, the answer is more or less straightforward. Recession is defined as three or more quarters of a fiscal year with less production. Depression occurs when a long-term recession occurs, with higher unemployment, less production, less revenue, and less buying and selling of goods and investments. In other words, one is bad, and the other is worse. During recession, it is paramount that you be responsible. That said, don’t be afraid of a payday loan if you need one. For more info on Payday Loans, click the link.

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