The scariest part of today’s economic turmoil is how preventable it was. I am not talking about additional supervision of an uncontrolled finance sector. While the sub-prime market was risky and obviously short-sighted, the overall laws of supply and demand eventually punish those who take unnecessary risks. What is more irresponsible and scary is the media coverage of it. We are in this deep of a mess because the not-enough-real-news-to-possibly-fill-up-a-day 24 hour news networks latch on to anything and sensationalize these stories beyond reason. We have accepted it in political and celebrity scandle, but its now hitting your pocket book.
The failure of some of these finance giants reduced the amount of flowing capital in our market. There is a concept I learned at Penn State as an economics major, called the velocity of money. Its a co-efficient that basically says for every real dollar, it can be lent out multiple times and create an economy that can be, say worth 7 dollars for every real one dollar. Lender failures reduced that some. What has paralyzed it is headlines citing that you may not be able to get money out of ATMs. This reduces the number of “real dollars” to start from. This is the consumer - not these banks.
Capital is harder to come by because of both this top level problem of viable financial institutions to create the velocity factor and a reduced denominator of real dollars led by consumer mistrust of having money in the bank/stocks/etc.
Today I see this sensationalism crossing even more headlines of where it shouldn’t have gone in the first place. Barron’s is reporting Salesforce.com: Rain Clouds for Cloud Computing. Yes, there is reduced capital for companies looking to finance risky ventures. Cloud computing isn’t one.
Think about it. Cloud computing is all about a market of commoditized IT. It reduces the risk of IT investment - dramatically lowering the bar on the amount of capital needed to enter, as well as the liabilities extended liabilities if the investment failed. SAP suffering makes sense, its customers deal with an enormous amount of capital - and their investments are considerable and lengthy. Some pause there makes sense - especially given the panic the media is inciting.
Cloud computing is entirely designed for opportunists. Invention, innovation, and growth will be in this sector. Incumbents who drag significant historical costs with them when changing direction may have problems keeping up with a dynamic market and economy. They are going to stagnate. But IT providers and their customers that are investing in “pay-as-you-grow” IT investments that not only cuts costs but speeds time to market have nothing short of an explosive opportunity to redirect an enormous portion of IT investment dollars very quickly.
Salesforce is being judged by their traditional CRM business just like SAPs business, and it shouldn’t be. Apples and oranges. The CRM market is fairly saturated (I should know, I have 10 years of Siebel under my belt). Their Force.com is what they should be judged on - they’ve created an entire ready-to-use marketplace around innovating new products and services to their core customers. The opportunities there for innovative new companies to start up, and reach success quickly - and expand the usefulness of the Saleforce CRM deployment is nothing sort of genius and has an awesome market opportunity to grow despite this economic climate. In fact, its success is probably going to accelerate because of it.
by Genís