Is ‘Big Tech’ On the Way Out?

Are big tech companies on the decline? In a post on Re/code, venture capitalist Matt McIlwain argues that they are. Though I don’t think the evidence he cites is either new or compelling, tech workers should still be aware.

Out the Door“IBM just reported its seventh straight quarter of declining sales, and I believe that the value of big cap technology companies as a group will substantially decline in the coming years,” McIlwain wrote. He says the changes in enterprise technology markets are “too disruptive on many, many levels for these companies as a group to overcome.”

As IBM Goes…

There has rarely been a time in tech history when someone wasn’t predicting the impending downfall of IBM, a company that has repeatedly tripped and gotten back up over the decades. While Big Blue isn’t the behemoth it once was, neither has it been sold to a foreign competitor at a fire sale price.

Indeed, IBM just shed its commodity server business to Lenovo for $2.3 billion. In 2005, the Chinese company purchased IBM’s ThinkPad unit and today is the world’s top-ranked PC maker, by volume. It now has the server presence it previously lacked. Analysts consider the deal a good one for both companies.

The deal also moves about 7,500 IBM employees to Lenovo, an example of how modern job security is tied as much to product lines as companies. Being on a company’s critical path will likely lead to longer employment than working in a business unit that could be sold off.

The Path of Evolution

The history of big technology companies reflects change over time. Only five of the 10 largest ranked by market cap today were on the list in 2000. In 2013, both HP and Cisco dropped off entirely.

This volatility allows the companies whose doom McIlwain predicts to look good in the short term. IBM, HP, Cisco, EMC, Intel, Microsoft and Oracle have a combined market cap of $1 trillion, up almost $100 billion over the past two years. The companies’ combined revenues declined $818 million (-0.2 percent) and profits increased only $138 million (+0.2 percent) over the same time. Still, they have between them “$218 billion of cash, hundreds of thousands of paying customers, and respected and established brands,” McIlwain himself notes. IT spending continues to grow in the 4.5 percent range annually, according to a Morgan Stanley CIO survey that he cites.

Big Tech is certainly changing, but its supposed decline reflects evolution more than a sudden death — or even death at all. Either way, employees have an important stake in their company’s future, though understanding what that future holds – and how to position yourself for it – isn’t as simple as individual news stories and columns sometimes make it seem.

Comments

  1. BY Dazza says:

    I don’t think size is relevant in the demise of tech companies but it’s more their vision and ability to innovate. Google and Apple are both “big tech” in terms of revenue and workforce, but both are innovators. Amazon is big tech. They’re frantically hiring.
    IBM’s problem is not its size but its relevance. I can actually pinpoint the year that IBM started its decline. It was the last half of 1991. Like the “Googles” and “Apples” of today, IBM in 1991 was able to boast that it had never had layoffs. I was working there on contract. For the first time in late 1991 IBM announced a reduction in permanent staff. The announcement resonated like a death rattle throughout the company. It was palpable. The permanent employees’ demeanor changed for good. They were being beaten by Microsoft, and their competing OS/2 product had died. Nothing good has happened for IBM since then. They’ve gone from bad to ridiculous. They even went into the mortgage business.

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