The Best Among the best news reports that appeared late this year is that the technology sector is finally joining in the recovery. A U.S. Commerce Department report says that total sales by U.S. technology companies topped $1 trillion. But that the rehiring of technology workers is proceeding slowly, partly because U.S. technology companies are turning to offshore production to keep costs down.The emergence of Salesforce.com as a leader among ASPs (application service providers) was one of the most positive developments in the enterprise applications sector during 2003. This is a company founded in 1999 that grew amid the wreckage of hundreds of other dot-com startups that crashed in a heap of shattered business plans, crushed dreams and worthless stock certificates. The company claims it is signing about 300 new customers and 5,000 new subscribers a month. It now has a total of 120,000 subscribers working for 8,000 individual customers around the world. This growth has allowed Salesforce.com to become profitable for the first nine months of this year when it reported a profit of about $4.6 million on revenue of $65.9 million. The company is using this momentum as a springboard for its own $115 million initial public stock offering that will be part of a 2004 IPO cycle that promises to be far more robust than the lackluster activity of the past three years. The growth of Salesforce.com has helped prove that hosted software services for important enterprise applications is a viable business model. It certainly convinced Siebel Systems that ASPs are a competitive force to be reckoned with when it decided to offer its own Siebel OnDemand hosted CRM (customer relationship management) service and bought out UpShot, another independent CRM ASP. The year 2003 was a time of significant market consolidation in the enterprise application space. Market consolidation can be a positive force if it is an amicable process that reduces market clutter and makes the surviving enterprises stronger. The most prominent examples were Business Objects acquisition of Crystal Decisions for $1.2 billion in cash and stock. Business Objects is a major producer of business intelligence software while Crystal Decisions was a prominent vendor of business reporting and analysis applications. The most hotly contested merger was PeopleSofts acquisition of rival ERP (enterprise resource planning) software producer J.D. Edwards for $1.8 billion in cash and stock. The acquisition allows PeopleSoft to combine its strength in the fields of financial services, health care, education, communications and government with J.D. Edwards prominence in the fields of manufacturing, transportation and distribution. Next page: The worst of 2003.
The report noted that the technology sector experienced an 11.2 percent drop in employment since 2000 while job cuts averaged about 2 percent in other private industry sectors. The technology industry has a long way to go before it can make up that attrition.