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In 2003 there have been a number of positive developments that brought encouragement to a recession- and war-weary nation.
But there was no shortage of scary sights among the best and worst developments of the year.
The economy continues to recover even though unemployment remains stubbornly high. This in turn has helped buoy the stock market well above the lows it hit during the recession and the shocks of the Sept. 11 terrorist attacks.
The country is tentatively regaining a measure of self-confidence that was lost through the shocks of the war on terror that helped deepen and prolong the recession that followed a decade of phenomenal growth.
The longing for a return to relative security is tempered by the nagging fear that some new atrocity on the U.S. homeland could upset a recovery that might otherwise continue for several years to come.
But a nation that was cheered by the capture of most wanted fugitive despot Saddam Hussein is hoping that some of the positive developments of 2003 will carry over to a safer and far more prosperous 2004.
The Best
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 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.
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.
The Worst
The Worst
But PeopleSoft found it had to carry out this acquisition with the barbarians pounding at the gate. As 2003 closes, the company is still trying to fend off the hostile takeover bid of Oracle, which wants to strengthen its enterprise application product line with components from the combined PeopleSoft and J.D. Edwards.
Oracle and its Chairman Larry Ellison also figured in a couple of the worst developments of 2003. PeopleSofts decision to rebuff the hostile buyout and follow through with the J.D. Edwards acquisition failed to cool Oracles ardor. The Redwood City, Calif., database giant is pursuing a proxy fight to try to force a buyout of the PeopleSoft/JDE combination.
The current PeopleSoft senior management could very well prevail in the proxy fight to remain an independent company. But the battle has complicated the companys efforts to integrate the JDE people and technology into a seamless organization.
Earlier this year Ellison displayed his own view on the prospects for future growth in Silicon Valley when he suggested to the Wall Street Journal that that it wouldnt be bad for business if another 1,000 northern California technology companies went bankrupt and disappeared from the face of the earth.
He meant that it wouldnt be bad for Oracles business if another 1,000 companies disappeared.
Casualties among high-tech and Internet companies have been appalling over the past three years. There is no question that the attrition is going to continue for some time to come as companies merge or shutter their doors because of the relentless forces of economics.
Sadly for Ellison and Oracle, some of those companies will survive the turmoil and one or two of them might actually grow to the point where they will become troublesome competitors for Oracle. Thats another effect of those inexorable forces of economics.
Another low point emerged when IBM disclosed this month that it plans to move as many as 4,700 skilled software production jobs from the United States to China, India and other nations where costs are lower. IBM says the move is essential to help the company remain competitive, and it notes that a majority of its workforce is already based overseas.
Thats little comfort to experienced American software engineers who worked years to acquire skills they thought would keep them employed for a lifetime. The standard argument is that such educated and skilled people will have no trouble shifting to even more rewarding work.
But this argument doesnt ring true to people who have spent months trying to subsist on unemployment compensation and savings. Many have had to move into stopgap jobs that are far below their training and experience while they hope that the technology sector improves enough to bring their skills back into demand.