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Dotcom Crash Just the End of the Beginning
by Howard Rosenbaum
Have we seen the end of a glorious experiment? Is the era of electronic commerce over?
IF YOU HAVE BEEN READING THE NEWS (ONLINE, OF COURSE), you are aware that the Internet bubble has burst. In fact, you may have been splashed - at last count, the number of dotcom layoffs had reached into the thousands.
A recent report from Challenger, Gray, and Christmas, an outplacement firm, estimates that job losses since the beginning of 2000 total almost 133,000, with close to 100,000 of them in this year alone. Many hundreds of e-businesses have closed their virtual doors; we all miss Pet.com's sock puppet and the zippy WebVan delivery service.
The Wall Street Journal has a page where layoffs and closings are listed alphabetically (see: www.wsj.com/public/resources/documents/dotcomlayoffs.htm) Even if the tragedy of September 11 had not happened, this sector of the economy would have continued its precipitous decline. Many millions of dollars were invested in companies that either began with "e-" or ended in ".com," and with hindsight, we wonder "what were these venture capitalists thinking?"
Have we seen the end of a glorious experiment? Is the era of electronic commerce over? I would suggest that we take an analytic step back, adopt a longer view, and consider that we are actually at the end of the beginning. For this reason, I remain optimistic about conducting business on the web. I also remain optimistic that our graduates will continue to find employment in this and related sectors of the economy.
Throughout the 1990s, venture capitalists, flush with money, invested in e-business startups with what looks now like reckless abandon. They were gambling on finding the next new thing, a company whose initial public offering would repay their investments many times over. To hit the big one, many investors believed that they had to cast wide nets. It appears now as though there was too much money chasing too few good ideas. More to the point, there were too few good ideas; many were, at best, half-baked and not supported with solid business plans.
Pundits predicting scenarios of gloom and doom may be taking a short-term view. Despite the cliche that one chronological year is seven web years, business on the web is less than one decade old. We are clearly in the early stages of understanding how to live and work in digital environments. It is reasonable to expect that there will be a period of painful trial and error as we begin to figure out the roles that the Internet and the web will play in our lives. Do we want entertainment delivered over the web? Do we want to pay our bills and conduct banking transactions from our computers or PDAs? Do we want to buy books and music from online stores? Software? Mortgages? Do we want to pay for web-based education?
These and related questions are typical of those that will shape market demand for e-business. Thus far, for example, we seem to be interested in buying books, handling our banking, and participating in auctions. We are not yet (and may never be) interested in grocery shopping, buying pet food, or paying for news online.
Hundreds of very expensive experiments have taken place in the last few years that bear this out. We are witnessing a shakeout that is midway through the process of separating good ideas from bad. I expect that e-business will become another channel for commerce - it will never force "brick and mortar" companies out of business. In fact, it is beginning to look like one viable hybrid form is "clicks and mortar," where online and offline channels support each other in interesting ways; think about Walmart.com!
When the shakeout is over, the companies that remain will tell us a lot about the direction of business on the web. I fully expect that our graduates will be able to compete for jobs in these companies. Their understanding of relationships among technologies, the people who design and use them, and the organizational settings in which the technologies are used, their ability to learn new technologies, and their technical skills make them particularly well suited to succeed in the new digital economy.
Howard Rosenbaum is an assistant professor at SLIS and teaches e-business and information architecture courses.
Posted December 14, 2001