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Managing the Meltdown

It's taken nine months, but the brewing financial calamity sparked by the meltdown of subprime real estate loans is finally getting the full attention it deserves from the media and public. With the Dow losing ground in chunks and long-standing financial institutions teetering on the edge of -- or falling into -- outright insolvency, it's clear that we're facing a major economic crisis.

Of course, our readers have been here before. In 2000, when the dot-com bubble burst and put an abrupt end to the hyper-optimistic chicanery that gave birth to companies like and, the developer and IT communities were particularly hard-hit. We, after all, stood at ground zero of the event. Tech spending crashed. Vibrant Web startups shuttered. And major telecom players like Lucent and WorldCom shed thousands of jobs.

Today, it's the financial sector taking the direct hit. Earlier this week, Lehman Brothers officially broke WorldCom's standing record for largest bankruptcy filing ever. The expanding list of failed or bailed-out businesses seems to be growing by the day.

One thing is clear: Software developers -- even those working outside of the financial services realm -- won't be spared the pain in this down turn. The question is, what can dev managers do about it?

Tom Berquist, executive vice president and chief financial officer of database vendor Ingres, said it may soon be time for dev managers to hunker down. As a former equity analyst at Citigroup and a managing director at Goldman Sachs, Berquist had a front-row seat for the 2000 dot-bomb implosion. He said the software spending lessons learned then could help dev managers cope now.

"The willingness to go to longer payback projects, where typically software development is focused, tends to get pushed to the short-term," Berquist said, urging managers to look to projects that can offer short-term, 60- to 90-day return on investment.

He said dev managers should review large-scale development proposals and prepare to shift focus to less ambitious work. A downturn, he said, is a good time to focus on long-delayed software upgrades and refinements, as well as to focus on tactical projects that can help drive specific business processes. He also said the slowdown offers an opportunity to focus on skills training.

The hard part, Berquist said, is knowing how all this will play out.

"I think it's just too early. The difference with this meltdown versus the 2001 time period is the 2001 [downturn] was exacerbated by 9/11. It started in 2000 and rolled off. It sort of happened over a three-year timeframe," said Berquist, who noted that the current downturn has a dangerous look to it. "We've lost a whole bunch of firms from this, and we could lose a whole bunch of other firms. As long as we have this situation, I would say it's tough for decision makers."

How is your development organization responding to the rough economic news, and what did you do to weather the last tech downturn? E-mail me at [email protected].

Posted by Michael Desmond on 09/18/2008 at 1:15 PM

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