Scandals don't bode well for IT

Here in London, the dominant reaction to the Enron, WorldCom, Adelphia Communications and now Xerox scandals and the subsequent decline in the dollar has been one of almost unrestrained gloating.

          Here in London, the dominant reaction to the Enron, WorldCom, Adelphia Communications and now Xerox scandals and the subsequent decline in the dollar has been one of almost unrestrained gloating.

          I guess this is understandable enough. For nearly a decade, the relatively deregulated US economy has been held up as a global model of transparency and governance, with shareholder value promoted as just about the only business measuring stick that mattered. Clearly, this message grated heavily on many European ears, especially the leftward-leaning ones.

          My reaction, of course, is quite the opposite: alternately disheartened, infuriated and even sickened by the steady revelations of executive dishonesty and greed.

          While one can always argue that these are just a few isolated examples that don't reflect the true American economy, these once highflying companies are simply too well known to be easily dismissed. More important from our industry's perspective, their actions have further darkened the already bleak prospects for the IT business.

          It's bad enough that all four of these companies just happen to be technology-intensive (although fortunately, most people still see Enron as an energy company and not as a business-to-business exchange). In combination with the dot-com collapse, their alleged transgressions would have been a harsh enough blow for any industry to absorb. But even bigger damage stems from the fact that few other industries are as dependent upon the overall state of market confidence as IT.

          The reality is that most people, especially top executives, don't really understand computers, and therefore, the IT business has always been characterised by high degrees of fear, uncertainty and doubt (FUD). Everybody knows this. But the connection that isn't often made is that it's this very same FUD that explains this industry's tendency to have strong boom and bust cycles, as well as dominant market leaders. Since most of us are anxious about our IT decisions, it's only natural that we often seek safety in numbers. This results in unusually powerful herd effects and occasional stampedes.

          This is why a general loss of confidence is particularly dangerous when it comes to IT markets. It's also why it's hard to see a quick end to the current industrywide slump.

          Remember earlier in the year when forecaster after forecaster said that IT spending would be soft in the first half and then likely pick up in the fall? This was mostly just wishful thinking and was always unlikely. But what's happened is just one more reason for IT users to pull back on spending, and it's clear that a sustained IT industry recovery is now further off than ever.

          From a longer-term perspective, the lesson is clear. Because FUD remains such a powerful industrywide force, the IT community must be especially vigilant in protecting its overall image. Clearly, adherence to the highest of ethical standards should be an important part of this effort. The IT business will always be full of risks and unknowns, as well as many great successes and failures. These dramatic swings make things scary enough for most of us. The last thing we need is to have to also worry about the very honesty of the business itself. Unfortunately, this is now the case.

          The herd won't move in a more positive direction until the industry's image stabilises and eventually recovers.

          Moschella is an author and independent consultant.

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