Sidney Hill, Jr.: Economic storms slow investment, but not innovation

As I write this, the U.S. Congress is debating something called the Emergency Economic Stabilization Act of 2008. You may know it as the financial services industry bailout.

Whatever it’s called, the emergence of this legislation offered a rare opportunity to see clearly how what happens in Washington can affect our everyday lives.

The breakdown of the financial services sector—the primary part of the economy that this act aims to stabilize—stems from large numbers of people being unable to make mortgage payments. It appears that many of those mortgages should not have been issued in the first place. What also has become obvious is that this situation is making it difficult—if not impossible—for both individuals and businesses to get new loans.

This fact resonated with me as I began reviewing pages for this issue of MBT, which focuses on emerging software vendors and technologies. The vendors highlighted in this issue are, for the most part, smaller companies that have unique products to offer—but lack the large customer bases of the huge enterprise software suppliers.

In the tech sector, companies typically rely on venture capitalists or other private sources of funding, rather than commercial banks. Still, when a credit crunch hits, it injures businesses of all sizes—and the smaller ones are hurt the most.

For the companies in our emerging vendors list, the blow can be twofold: These companies may have trouble getting the funds they need to continue developing their products, and they are likely to find many of their customers—which also are small and medium-size businesses—feeling the need to delay new software purchases.

There is a potential silver lining in this cloud for a number of our emerging vendors—those that offer their products in the Software-as-a-Service (SaaS) model, which greatly reduces the cost of both the initial system deployment and ongoing maintenance.

While it’s not likely that the SaaS model alone will be enough to persuade large numbers of companies to adopt new software in the current economic climate, it is likely that the memories of this period will cause a lot of companies to look much closer at this model when the economy recovers and people are ready to resume software purchases.

This will indeed be good for a number of the companies on our emerging vendors list—companies like Plexus Systems, which offers a SaaS-based ERP suite; and New Momentum, with a SaaS-based product that helps manufacturers reduce myriad supply chain risk factors.

If you read our emerging vendors coverage, you will notice that the SaaS model is not the only innovation in the manufacturing software space. You’ll learn about companies like River Logic, a newer vendor offering a solution with a new twist on supply chain optimization; and Zontec, an established vendor of statistical process control (SPC) software that now makes SPC results available through mobile devices like the iPhone.

This issue proves that innovation continues in all economic climates. Let’s just hope that the Emergency Economic Stabilization Act of 2008 clears this current storm sooner rather than later.

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