So when I was in Australia last week, the US was going through some pretty interesting times. Wall Street seemed to be melting down, Congress had to jump in, with lots of finger pointing about what the causes were. Among other things, It made me wonder what the long term consequences will be for schools, and for companies doing business with schools.
Back in July, I wrote this post, Twitter buys Summize – should educators care? In it, I talked about how many Web 2.0 companies will consolidate and/or vanish. If a school or district technology plan is built on these free web apps, what happens when they disappear? And sounding very prescient, I said, “It’s not a matter of if, but when. Are you ready?”
What happened here in the US over the past few weeks just makes that more imminent. Imagine if you are a Web 2.0 company with a free product. Your bottom line is that you need to get bought or get funding (since you aren’t making money.) Or, if you have funding, you need to pay back your investors in some time period. And along the way, you still have to pay your employees and all your bills.
But now, there aren’t going to be a lot of IPOs, you can’t get your credit line extended from the bank, and those potential investors aren’t even returning calls. If you do have investors, they are going to be watching you harder and expecting more. If you were hoping to get bought by some bigger company, well, their stock just dropped and they won’t be going shopping for a while.
So what do you do? You have to make a decision. Make your one year of funding last for three…. or walk away.
If you want to try to skinny it out, you cut expenses to the bone — like marketing, promotions, and staff. You put new features on hold and try to make money on what you’ve already got. And of interest to educators.. you cut your support to areas least likely to make money, particularly small niche markets like schools.
Of course everyone is affected by this financial crisis, not just Web 2.0 companies. School budgets are being cut as well, making it even more tempting to use free tools. There are definitely alternatives such as open source, as Tom Hoffman pointed out in his response to my earlier post. But every alternative has its long and short term costs, and as we are about to find out, there is just no Free Lunch 2.0.
Next, I’ll take a stab at picking the winners. Any early favorites for which favorite edu-tools 2.0 will remain standing? Leave them in the comments and we’ll do some forecasting together.