Dotcombust

Causes & impacts of the dot.com 'bust'.

Table of Contents

Table of Contents 3

Introduction: 4

Causes of the dot.com 'bust' of 2000 - 2001 5

The effect of the dot.com 'bust' on Network Administrators. 8

Conclusion: 13

Reference List 14

Introduction:

During the 1900's there was a boom in dot.com start-ups specifically and in technology companies generally. Internet technology was relatively new and was being claimed as the answer to everything. Shopping for groceries, records, books, and houses was all predicted to move to an online world. Venture capitalists were investing enormous sums in businesses that had no proven track record and very little in the way of business plans or serious business experience. Much was made of the culture of the dot.coms - the casual dress, workplace masseurs and potentially enormous earnings that could be made. Employees were enticed from previously stable positions to join the rapidly changing and developing dot.coms. The technology was still under development and consumer take up of online commerce was slower than expected.

One area where there was unprecedented success in the take up of new technology was in the development of online trading and in the numbers of people who took up day trading and were caught up in the excitement of the rapidly climbing dot.com stocks. Unfortunately the success of this area of e-commerce probably contributed to the bursting of the bubble. Share prices had climbed without a parallel increase in the profits of the dot.coms. In fact many dot.coms had not shown any profit. Emphasis had been placed on building consumer awareness and branding their products, as opposed to developing and increasing a profit margin.

Historically every boom has been followed by a bust and the dot.com era was no different. The end of the decade saw the collapse of many dot.coms and the loss of employment and earning power for many information technology personnel. The retrenchments throughout the IT industry because of the bust are still legend.

Causes of the dot.com 'bust' of 2000 - 2001

There was more than one contributing factor to the dot.com bust. Economic, technological and social factors all contributed to the growth of the dot.com bubble, and then to the bursting of the bubble.

During the height of the technology boom, dot.coms' that weren't showing any profit were given billion-dollar values in the stock market. "Earnings count, and valuations are important," says Al Goldman, chief market analyst at A.G. Edwards. "Those got forgotten, and that was one of the problems."

Imaginative Engineering CEO Michael Topic (2001) argues that although the dot.com crash wiped out companies with poor business plans, others were potentially viable and profitable. He feels that the reason many dot.coms failed was related to web usability and bandwidth, and that many ecommerce sites were poorly written and ran very slowly.

The rapid and enormous change in technology meant that entrepreneurs who saw the potential of the coming technology may have been blinded to the existing limitations both technically and socially. Because it is possible to shop, bank, socialize, read the paper and watch movies over the internet does not equate to the reality of many consumers doing all of this regularly over the internet.

Particularly at the time of the dot.com bust when broadband connectivity was only available to a very privileged few and for most consumer's bandwidth constraints and clunky programming combine to prevent the internet from becoming the preferred way of interacting. Time is also needed for people to adjust to changes such as purchasing online. For many people security issues, privacy issues and a fear of dealing over the internet as opposed to speaking to 'real people' impacted on their take-up of online purchasing.

As the share prices of dot.net stocks rose alongside the ability of ordinary people to purchase shares over the internet and to track those shares in a real-time manner the quantity of day-trading reached an all time high. This in itself would have led to unrealistic share prices.

Many employees of dot.coms left secure positions with traditional software and hardware vendors for the exciting and potentially lucrative world of the internet. Whilst these people brought a wealth and breadth of technological experience specific experience would have been lacking. The internet and associated technologies were too new for personnel to have accumulated long-term experience.

Many start-ups were formed by friends with a 'great idea' but lacking previous business training or experience, and without having yet turned the technology side of the idea into reality. Stories abound of dot.coms that never actually had the ability to deliver on their promises. One example is website developers that couldn't actually deliver the active content that they promised using existing technology of the time.

The oft cited image of the young dot.com CEO sporting piercing's, trendy clothes and little business experience would have also contributed to the failure of some dot.coms. Running a successful business regardless of whether it's a corner store or an e-commerce site requires business acumen and skills alongside the particular technical skill requirements.

The effect of the dot.com 'bust' on Network Administrators

In this section I am drawing extensively on my own, and my family's experiences. The dot.com bust caused significant downturn in available positions for Network Administrators in the years following the bust. Many Network Administrators have changed career paths, either entirely out of the IT segment or diversified into other areas of IT. The fallout from the salary/stock option structures of the dot.coms has led to a preference for secure salaried positions where these can be found. Remuneration has significantly decreased compared to pre bust days.

Network Administration is an area where there is an ongoing need for personnel, and indeed where there are currently an increasing number of positions. Immediately post 'bust' this wasn't the case. Many people had entered this arena of employment due to the large numbers of highly paid positions available