Technology companies learned from the dot-com bust to never put your strategic growth plan on the shelf just because a recession comes along and knocks you down.

Despite the recession, the health of the technology industry is relatively intact, thanks in part to the way it operates and lessons learned from its historical ups and downs and from the dot-com bust.

The bad news is that the crisis has changed the technology landscape to a situation of “haves” and “have-nots.”

The “haves” are companies that created extraordinary flexible operating models to complement good strategic plans, and that constantly reevaluates both.

The “haves” continue to invest in R&D at a high rate while ruthlessly rationalizing their R&D programs.

The “have-nots” are stressed companies forced to restructure and divest assets, but not on their own terms.

The economic crisis hit technology companies with falling demand for both corporate Information Technology (IT) and consumer technology products.

But, the industry’s tradition of high speed and agility is helping its leading companies execute an extraordinarily rapid, effective response. Many technology companies are already exceeding (admittedly lower) investor expectations.

The impact of falling sales demand varies by technology sector: Some areas are seeing revenue decline by 50% or more (semiconductor supply chain), while others have maintained double-digit revenue growth (embracing the demand for services such as SaaS).¹ As one CEO said: “This is a quarter of opportunities as well as challenges.”²

What’s happening now?

Most technology companies are focusing on building and maintaining a flexible business model and staying ahead of trends to meet future demands.

Weaker companies are divesting many of their noncore assets and withdrawing from nonstrategic markets. Others are being forced out of business completely.

The adoption of managed services and cloud computing is accelerating because of advantages in pricing.

The pervasiveness of technology in everyday life helps put a floor under falling consumer demand. Most consumers will give up everything except personal care products and groceries before dropping their internet access.⁴

There’s hope that technology will make solving large societal problems — like healthcare reform, rebuilding the power grid, and education reform — a reality in the near future. Technology is regarded as a powerful ally across a range of sectors.

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1. “Salesforce Raises Guidance For Year As Q2 Beats Views,” Investor's Business Daily, 21 August 2009, via Dow Jones Factiva, © 2009 Investor’s Business Daily.
2. All executive quotations appearing in this report were taken from transcripts of public technology company earnings teleconferences that took place during the spring and summer of 2009, unless otherwise noted.
3. All survey data referenced within this report is from Ernst & Young’s Opportunities in adversity 4 June 2009 survey.
4. “The internet beats summer holidays and nights out,” The Daily Telegraph, 6 August 2009, via Dow Jones Factiva, © 2009 Telegraph Group Limited, London.