Black Monday, Tuesday, Wednesday, Thursday and Their Effect on IT

Dennis Byron

No IT blogger worth the title can let the week of October 6 pass without relating what's happening in the financial markets to IT, and its effects on IT managers and staffs. Actually I'd rather hear from you and find out what you think about how the credit crunch, stock-market collapse, and likely/real recession might affect IT. In the meantime, here are three periods of economic downturn, along with what they meant to IT folks. Each was marked by lows in the Dow industrial average.

  • 1974 and next few years--
    • Dow fell 45 percent to bottom of a 20-year range, somewhat linked to the rapid run up in oil prices following the October 1973 Yom Kippur war. But -- and maybe there is a lesson here -- there was also a lot of restrictive U.S. government intervention in the free market at the time, not to mention a minor period of U.S. political corruption known as Watergate.
    • The good news is that IT staffs were not affected. No one even told the guys in the room with the raised floor that there was a recession. Very few people even knew where the "DP system" was located in the building.
  • 1987 into early 1990s--
    • Dow fell 23 percent in one day in October 1987, so-called Black Monday. (There have actually been many Black Mondays, but this one was my Black Monday.) It fell 31 percent from its 1980s high over that week. Unlike the events above and below in this list, there were no obvious U.S. or geopolitical events to blame for the drop. In fact, IT might have been to blame: This was the period when programmed trading began.
    • From an IT staff point of view, the 20-something IT folks of 1974 were now 40-somethings. Packaged software had become popular, requiring fewer IT personnel in the enterprise. The hot-shot 20-somethings of the late 1980s went to work for the packaged software companies, instead of enterprises. In enterprises, older IT guys were laid off, many to be brought back -- in a form of poetic justice -- for high consulting fees during the Y2K crisis. Outsourcing and offshoring began in earnest.
  • 2001-2002--
    • In October 2002, the Dow fell 38 percent from 1990s highs, in a cycle loosely tied to the terrorist acts of 9/11/2001 and the impending war in Iraq.
    • From an IT staff point of view, jobs had been outsourced and offshored as much as possible. With demographics contributing, there was actually the beginning of a shortage of IT folks. Management couldn't cut the person hours required any deeper than it had in the 1990s, so it looked for IT automation techniques.

I realize that the above is U.S. centric, but the wisdom of the day was that when the U.S. sneezed, the rest of the world economy got pneumonia. I am not sure that has changed that much. In addition, each of these previous "breaks" had watershed meaning in terms of the IT market, which I will look at in my next blog post, to be followed by posts on predictions for 2009-2010 and 2011-forward.



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