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The coming consolidation

by Douglas E. Welch

June 16, 2000

© 2000, Douglas E. Welch

While I am far from an expert on the stock market and invest only lightly therein, the large fluctuations of the last few months started me to wondering about what the future holds for everyone in a high-tech career. Unlike some, I am not predicting doom and gloom about a coming stock market crash. Instead, I see maturity settling into Internet companies as happens with every new industry. Witness the taming of the PC hardware business over the last several years. Where there were once thousands of hardware manufacturers, through merger and acquisition 9 or 10 companies now dominate the industry. This maturing process has several messages for all of us who work in high-tech careers, some that we might not want to hear.


One of the first effects you will see in this maturing market will be the consolidation of many independent companies into several large entities. Just as publishing companies collect many magazines under one banner, Internet companies will begin to collect various, complementary companies under their control. I don't think we will see more AOL/Time-Warner mergers very soon, but we will see the continued growth of Internet powerhouses such as Yahoo and Amazon as they seek to buy more and more companies in order to diversify their markets. As these companies move into profitability, this trend is sure to grow.

This consolidation, by itself, will have a major effect on high-tech careers. It will mean the end of sweetheart recruiting and hiring packages for all but the most elite high-tech starts. The Internet industries will start to move from a worker shortage to a more stable level of supply and demand. Most will begin to develop a stable of in-house tech experts who create infrastructure for all their "products" while smaller, editorial staffs will create and maintain content for each individual Internet site. In this way, much like the old studio system in Hollywood, companies will start to reduce the redundant expenditures involved in managing independent companies, as opposed to divisions of one company.

This could mean that the days of the high-flying tech entrepreneur are waning. While there will still be a place for entrepreneurs, more and more high-tech workers will be drawn back into more traditional corporate roles. Granted, these corporate roles will be much different than before thanks to the changes wrought by the last few years of entrepreneurial growth. Some of the perks, casual dress, espresso machines, higher salaries, will continue, but I believe the days of outrageous expenditures are quickly coming to an end. Entrepreneurs may move back into their more traditional "startup" role instead of the high-profile CEO role that many find themselves in.

Less IPOs/More buyouts

As the Internet industry matures more and more you will see a move away from high profile Internet IPOs (initial public offerings) towards the selling of small companies to larger ones. Much in the same way that small hardware and software manufacturers position themselves to be purchased by tech heavyweights such as Microsoft, large Internet-related tech companies will always be looking for a new acquisition that can boost their fortunes.

So, while there will still be a place for a few entrepreneurs, it is far more likely that you will make your fortune by selling out, not going public.

Watching the industry

Regardless of where you are currently working, or your salary level, it is important to closely watch the high-tech industry as a whole. You need to constantly adjust your career plans according to the changes you are identifying in the industry. When business methods change, so should your career plans. This purposeful observation of the industry can help you to make wise decisions regarding your career and can help you rise above those who aren't paying attention to the changing tide.

Despite the concern you might hear in the media when they cover them, Internet businesses aren't about to dry up and blow away any time soon. Internet companies are just entering a new phase of their development. Maturation is a tough passage for people, companies and even entire industries. You need not fear an outright collapse, but you will find that many things change on "Internet Time" including the entire Internet industry.

Douglas E. Welch is a freelance writer and computer consultant in Van Nuys, California. Readers can discuss career issues with other readers by joining the Career Opportunities Discussion on Douglas' web page at:

He can reached via email at

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