It Isn't Just Nortel

Nortel's woes are front-page news both locally and internationally. However Nortel is not the only local Ottawa technology outfit cutting back, even if they are the largest. There's Mitel making the headlines for similar reasons and, occasionally, other smaller companies in the same boat make the headlines. Seemingly overnight the recession has arrived and business has dried up.

There are many small, local technology companies that are cutting back. Most of these fly under the radar since the media either aren't aware of what's happening or choose not to report about these high-percentage cuts that are low in absolute numbers. I suspect the truth is more the former case since the investors and management of these companies do not want these cuts to become generally known. The most likely reason for the companies' silence is to avoid a loss of confidence among their few current and prospective customers. There is little that can kill a startup faster than a prevailing belief that it will not survive; businesses can't risk purchasing goods from or becoming even modestly dependent on a company that is soon to be no more.

But talk to people and the stories come out. Sometimes they are told loudly and sometimes merely whispered. Those companies that haven't cut head count are freezing hiring and getting ready to squeeze the layoff trigger if they get a whiff of revenue drying up. Business confidence is running very low.

One important company that is making cuts to their local technology staff is Bell Canada. While it isn't a secret I am surprised that it appears to be largely escaping the notice of the media. I don't know why that is. When the majority of the technical staff studying and planning new product initiatives is let go you would think that is newsworthy. Yet the cuts go further, cutting across many technology groups in the company.

I am both surprised and not surprised by this development. On the not surprised front, it makes little sense to spend money developing new services if they are not being pushed out to the market. The company's stance for the past few years has frozen many initiatives to get new technology out to customers. How much of this is due to the long-duration process of selling the company, I do not know. Perhaps management just doesn't believe that technology, and the new services it can enable, will get them out of the competitive hole they are slowly sliding into. What surprises me is how a company like Bell Canada which is so dependent on technology could sit on it collective hands for years, knowing that competition from cable and new wireless providers is increasing in scope and intensity.

Cutbacks like those described above are likely to continue in the local high-tech scene. VC's are sitting out the downturn so their investments must do so as well. Unfunded startups must continue without capital injections. Public companies are scrutinized by their public investors and must try to defend share price by reducing expenses at this difficult time. It isn't just about investor relations; they have to do it.

2009 is going to be very difficult for many technology firms in this town and elsewhere.