Andy on Enterprise Software

The economy and Wile E. Coyote

October 27, 2008

Like many of us, I am curious as to what extent the meltdown in the banks will affect the rest of the economy and, in particular, enterprise software spending. Random conversations over the last few weeks with vendors have been varied, with only those exposed heavily to financial services seemingly seeing a real decline in spend (one company had Lehman Brothers on its Q4 sales forecast). Certainly some sectors may barely be affected e.g. the public sector, or perhaps pharmaceuticals (people still get ill and will need to pay for their pills) and maybe law (imagine all the fun the lawyers will have as banking positions unwind and contracts cannot be fulfilled, never mind the shareholder class action suits). However there are only so many of these and I wonder whether we are in the situation that you get in cartoons, where Wile E Coyote or Bugs Bunny runs off a cliff and happily progresses forward until he actually looks down and notices there is no ground any more.

A troubling sign of this is in a sector a long way from the world of credit default swaps, that of trucks. Volvo is one of the largest suppliers of commercial lorries and trucks to continental Europe, and sold 41,970 trucks in the third quarter of 2007, when admittedly things were booming. They just announced their Q3 2008 results. How many trucks do you reckon that they sold? Less than 41,970 for sure, but what what sort of reduction might you expect? Maybe a 10% drop in sales, perhaps 20%, or even 30% if things had become really bad? Well, they actually sold 115 trucks in the last three months. That is not a typo. It is a 99.7% reduction in sales.

Now that is a scary number.

The Information Difference will shortly be conducting a survey of enterprise software buyers, looking specifically at their spending plans for master data management and data quality. I’ll keep you updated when we have some results (a few week’s time). If your company would like to sponsor this survey, you have four days left to do so (just contact me and I’ll send you details).