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“While many enterprises might try to reduce IT expenses in the next year as the global economy tries to regain its footing, Cisco Systems CEO John Chambers (…) will increase its IT budget by 10 percent (…) ‘you can use IT to gain a competitive advantage,’ Chambers said.”

Read Scott Ferguson’s article, “Investing in IT in troubled times,” on eWeek.

“Mr Kwatinetz is bullish about the prospects for those start-ups that manage to survive the crisis. They will face a much less crowded field and their managers will have honed their moneymaking skills in the hardest of all environments.”

Read “Fright night in the valley,” on The Economist.

LinkedIn, the professional networking site, managed to raise $22.7 million, SAP being one of the investors. Syncplicity, whose product synchronizes files across multiple devices, has raised $2.35 million. Earlier in the month, eBay bought Bill Me Later for $945 million.

PriceWaterhouseCoopers reports that there were 34 start-up or seed venture deals involving companies in the ‘network technology’ sector last quarter. Trilliant, Mimix Broadband, 3Leaf Systems, Mail.com, Riya, Vanu, Lightwire, Greenplum, Palo Alto Networks and JumpTap being the top 10 recipients totaling more than $320 million.  That is just two deals shy from the deals registered the same quarter of last year.

However, with the exception of Syncplicity, these are mostly later-stage companies. Liquidity continues to be an issue of concern. As a matter of fact, this past third quarter compares unfavorably to that of last year by about $1 billion.  The question in everyone’s mind is whether we have hit rock bottom but most people I have talked to don’t think that’s the case. 2009 is expected to be a quite challenging year. PWC and the National Venture Capital Association appear to confirm that.

The Economist’s article talks about the learning from the dotcom crash of 2001. Survivors became frugal, halted activities that were not on the company’s critical path, focused on core projects and implemented swift and deep cost cutting. This unfortunately means job losses with Pandora, Seesmic and AdBrite being a few examples this time around. Mike Speiser of Sutter Hill Ventures is quoted saying that ‘rule number one is to take immediate measures so you can stay in the game.’

BusinessWeek’s ‘Making money without Mad Ave’ discusses the need for innovative business models thinking of those online companies who are mostly relying on advertising revenues. It is clear that users are more engaged when using the web than when watching TV, listening to the radio or reading print press. However, the bulk of the ad dollars, 80-90% depending on the account, continue to go to traditional media.

As shared in one of my previous posts, the economic downturn could help grow the share of ad dollars captured by online services as they can become a more effective channel. However, the net gain might not be too apparent as it appears that the overall pie is shrinking considerably. This prompts online outlets to look at pricing models addressing subscriptions, utility and pay per use, and charging a premium for value added services.

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José de Francisco López
Chicago, IL     31 Oct 08