John Katsaros

Recession Tales

If you didn't think there was a recession before you went the RSA conference, you might have come away with a completely different view. The conference was "too quiet" which may have been due to its unusual scheduling (usually the conference is in February while this year it was in April during a week which conflicted with two other infrastructure events plus Spring Break for many families). But you couldn't help feeling the slowdown -- it didn't seem as big or as active as past RSA events. And there is plenty of reason for thinking that the security business could be in for an economic driven slowdown. As you know, the security value propositions have evolved to include risk and compliance. Several vertical markets, most notably the financial services vertical (banking, securities and insurance) consequently play a greater role in the early adoption cycle of these products -- the financial industry understands risk and has lots of regulations to deal with. Unless you've been under a rock for the past six months, it's hard to miss the fact that the financial sector is being pummeled due to the mortgage crisis -- companies in this space are loosing billions. It's well known that companies in the financial sector are quick to respond to changes in their bottom line by increasing (or in this case decreasing) their IT spending. And of course, it's likely that what gets cut first is discretionary spending on new project initiatives (the very thing that the security infrastructure sector needs the most). So it may be that there is a direct path from the front page woes of the financial industry to a slowdown in the rate of adoption of new security initiatives. Usually, we look to the financial sector to lead infrastructure sectors out of a recession by being the first to increase budgets. The question is: "If not them, then who?"

Peet's Economy Watch

As you've read here before, we have a really simple metric to gauge the economy -- it's our local Peet's Coffee Shop across the street from our office in downtown Los Altos. There are three questions we ask -- what kind of cars are parked in front at 8AM (execs getting caffeinated before starting their day), is there a line at 10AM (rendezvous for job related networking) and how many bicycles are parked outside in the late afternoon (job seekers taking a break). During the economic up ticks the answers are -- expensive Mercedes in the morning, no line at 10AM and no bikes in the afternoon. Our indicators are currently showing a pretty good mix of expensive cars in the morning but there's beginning to be an annoying line around 10AM and bikes have begun appearing in the late afternoon. So we're getting mixed signals.