2009 Predictions and Prognostications

Happy 2009 one and all!

I'm not going to make predictions on specific technologies or sub-markets within identity management for 2009. I know that many of my colleagues in the blogosphere will be making those predictions so I thought I'd blog about how the downturn in the economy is going to affect identity management at a more macro level instead. So here goes...

Do More With Less (employees, consultants, temporary staff)

Layoffs abound. Predictions are that for 2009 we will see even more. The one thing that I do know is that companies turn to technology to automate even more when staffing gets tight or when layoffs happen. The proverbial "do more with less" term will be bandied about until things turn around.

What does that mean for identity management? Well, in my mind it comes down to operational efficiency. How can you continue to effectively perform all of the tasks that your group has been asked to do with less people? Well, first thing you do is prioritize your tasks and stop doing the lowest priority set of tasks. Second thing you do is look at the rest of your tasks and see how you can automate them. So my first prediction is we will see an uptick in identity management software revenues for products that specifically help to automate tasks (e.g., provision) or help cope with reduced staffing levels (e.g., self-service).

Expect to see consultants get the axe too. Those are easy bottom-line savings for many executives to make. Tough times for consultants unless they are working on projects that have a very clear trajectory to reducing costs or increasing revenues. I've been in the room when the exec asks the question: "Choose between employee layoffs or cutting consultants." I've never seen managers jump up to volunteer their own staff first.

Tough Times for Venture Capital-backed Firms

Ugh. I'd hate to be at the helm of a VC funded company right now. Why? Generally speaking, the VC guys only invest in a company because they see a way to exit with more money. Most VCs hope for at least a 10X exit strategy. Invest $50 million and exit with $500 million. Not bad for a few years work. Problem is in this economy the multiple (10X) that a VC can expect gets compressed downwards. Companies that are acquiring are smart and they say "Well, your revenues are down, and we simply aren't going to pay you 10X. We'll pay you 2X." Or, if there are no buyers out there and the company needs more VC funding the VC will either say "Forget it, we've already put too much in" or they'll say "Sure, but rather than increasing our stake by 10% for that extra $5 million we will increase our stake by 40% for that extra $5 million."

The net effect is that VC funded companies are going to see a lot of pressure for results (i.e., revenue, new customers) in 2009 in order to get an exit or to get more funding. IPO? Forget about it. There's a double whammy to be aware of, too: Many VCs - especially in the IDM arena - count on the financial vertical as their early adopters. Well, in case you've been living under a rock, those guys are in trouble and that will mean less sales or reduced revenues coming from that vertical. So my prediction is that we'll see more VC backed companies disappear, get desperate or get discouraged in 2009.

Remember when things get tough - as is happening right now - start looking for a seat in the lifeboat now. And remember that there are never enough seats in the lifeboat...

Here's some of the 2009 predictions and 2008 reviews that I've noted:

Dmitry's PowerBlog - Happy New Year

Ian Yip's Security and Identity Thought Stream - Wrapping up 2008

Jeff Bohren's - Seasons of Change

Mary-Jo Foley's - What will - and won't - Microsoft do in 2009?

Photojojo's - 120 of 2008's Most Amazing News Photos

Sahaa's - 2009-2010: Predictions about Identity and Privacy Management

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