Jeff Stiefler, Chairman of TouchCommerce, is a former president of American Express and CEO of IDS Financial Services. He also was the CEO of banking outsourcer Digital Insight, now part of Intuit. Stiefler spoke recently with ECT News Network interviewer Blake Glenn about technology and the economy.
The financial crisis sweeping the U.S. economy will cut a wide swath of destruction that will include the fast-growing technology sector.
He predicts a tightening of capital markets, including both venture capital and debt financing; firms conserving their cash and reducing expenses to weather the storm; a significant rise in business failures due to the inability to access needed financing and a slowdown in purchasing by corporate consumers of technology services and products.
Listen to the podcast (18:13 minutes).
Firms across the board will be cutting back on technology projects and focusing on those that are mission critical and those that provide proven return on investment. Projects that merely streamline an administrative function, for example, most likely will be deferred, he said.
In fact, he suggests that the acquisition of technologies that increase sales, reduce costs or improve customer retention could actually increase.
When asked about the role technology can play in the crisis, Stiefler quickly points out that there is no technology solution to this crisis. However, the technology sector will continue to be a driver for the U.S. economy, he said.
Here are some excerpts of the interview:
E-Commerce Times: There’s a big elephant in the room right now, which is the financial crisis that’s going on that is impacting the entire economy. Because of your deep background in technology and your background in financial services, I just want to get, first of all, your general perspective on the financial crisis.
I’m not sure I have any more information than anybody else who reads newspapers or watches news on television or listens to it on the radio. Clearly, we’ve gotten ourselves into a position where, for a variety of reasons, institutions have not been able to bail themselves out of credit-related problems and the government has had to step in in a major way to help them do that. It’s, I think, a very unfortunate turn of events, and it’s going to create a deep set of problems that we’re going to have to work our way out of as a country, but we clearly will work out of them, it’s just going to take some time.
ECT: From your perspective, what kind of impact do you think this crisis is having on the technology industry, whether it’s in terms of getting loans, or getting venture capital, or any other kind of impact? What kind of impact do you see happening right now?
Getting capital in any form is always challenging for firms, whether they’re younger firms trying to get venture capital or more established firms trying to raise debt. As a consequence of that, companies are shepherding cash, which means they’re not using their cash to expand in the way that they’d normally use, and they’re trying as hard as they can to reduce expenses wherever they can to help them use as little cash as possible. That’s true across the board, it’s true in companies of all sizes and in all industries. It’s probably more true in financial services than it is in other places because that sector’s been the hardest-hit, but it’s a condition that exists everywhere.
ECT: Do you think that this is going to cause a shakeout among some of those emerging growth technology companies that may have received some venture capital but may not have enough money, or have the wherewithal either to raise the next round of financing or the money to make it through this financial crisis. What do you see happening there?
I think there’s going to be a significant rise in business failures of all types, because again there’s very little access to capital, and buyers of the services of these venture-backed companies will often be cutting back on their purchases, so the cash coming into these companies will erode to some degree. So firms that need a lot of capital in order to be able to turn the corner and can’t revise their business models fast enough are going to fail.
ECT: What do you see as being the current state of the information technology and Internet sectors right now?
As it relates to the problems that the economy’s going through, the technology sector will clearly be impacted. Firms are going to cut back on investments everywhere, and they’re going to defer projects as long as they can in a lot of places, and they’re going to focus their investments on those areas of technology where there’s a proven and certain return on investment. They’re going to go through a very disciplined process, prioritizing the investments that they make. I think firms that provide technology that’s nice to have but not mission critical are going to struggle.
ECT: What are some of the technology areas that you think are going to continue to get some of the funding from the financial community?
I think technology that helps people drive increased sales or helps them reduce costs or helps them improve customer retention and generates higher revenues per customer are all things that will be really difficult to cut back on, and in fact, one could argue, may even increase in value. I think major systems changes that improve to some degree the quality of an administrative function are things that are likely to be deferred.