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Buying an IT business: a sector analysis

At a glance

  • Since the dotcom crash, the IT world has again become lucrative and prosperous
  • Most households now have a computer and internet access
  • Web shopping is increasingly popular
  • Online businesses  have proven more resilient than most in the current downturn
  • Buying an existing IT business in support or training is probably the easiest way to enter a growing market
Starting an IT business

Back in the mid 1990s, the press was full of stories about virtual millionaires, informing the public of how their lives would be transformed by the internet.

Their small companies gained the net worth of multinationals in a matter of months.

Meanwhile the champagne flowed endlessly at a plethora of PR launches and parties. The business pages were full of predictions of a new economy based almost solely on IT. Hoards of eager young entrepreneurs crowded into the sector.

Dotcom crash

A few years later, the bubble burst. Share values plummeted, accountants and investors panicked, and companies went bust.

Regardless of the see-saw fortunes of the IT sector during the 1990s, the onward march of the internet and the home PC has been unstoppable, and they are now integral parts of British life

Investors returned to the old staple industries in search of more stable returns.

Some of the newly unemployed, such as the proprietors of ill-fated clothing retailer Boo.com, spent their new-found free time writing books on how not to run a business. (BusinessesForSale.com avoided the same fate because it put technology at the heart of the business).

Others, especially those with a more focused and detailed business plan, battened down the hatches and waited for things to improve. Over the last few years, they most certainly have.

In fact, even the worst global downturn since the 1930s hasn't been enough to stifle growth. If anything, web businesses have won a growing slice of a shrinking worldwide demand.

Once upon a time, the words 'dot' and 'com' were enough to turn the average banker, economist or property agent a very pale shade of white. In business circles, they became very rude words indeed.

That was before the NASDAQ-100, the US share index dominated by tech companies, began its almost uninterrupted drift upwards in October 2002. In the 12 months following that, the index increased by 50%.

This new-found confidence in the sector reflected the fact that the businesses that survived the great clear-out of that time were beginning to become viable and, more importantly, profitable.

Companies such as lastminute.com, amazon.com and ebay.com are now viewed as business models to aspire to rather than avoid.

Regardless of the see-saw fortunes of the IT sector during the 1990s, the onward march of the internet and the home PC has been unstoppable, and they are now integral parts of British life.

From booking a flight to tracing the family tree, the web has become almost as universal as the television or radio. Most of the population now has access to the internet, with the vast majority now enjoying rapid broadband access.

Internet shopping

Consumers have become far more used to the idea of shopping over the internet, and many more people are prepared to pay for goods online using a credit card.

With an economic turnaround on the horizon, now may be exactly the right time to put that business plan into action, whether it is for an internet shopping facility or a specialist trade software application.

Establishing a new venture in IT can often require comparatively high costs initially as systems are developed, although operating costs can be low after this initial investment. Now could be the time to capitalise on an employers' labour market.

Unlike during the height of the boom in the late 90s, developers can be hired for very reasonable costs. Fees for full-time and freelance programmers have halved in some cases.

It is also important to remember that the consumer market is only a small part of the whole IT industry. Many, of course, provide services for other businesses.

IT is one of those industries, like advertising, that economists regard as an early indicator of activity. Companies plan projects and begin recruiting staff and signing contracts with suppliers before their turnover necessarily increases.

If battling with visionary projects or dealing with fine detail does not appeal, there are other, more public-facing ways of entering the tech sector.

Public computer literacy has not caught up with the continually growing levels of computer ownership and there is still a desperate need for adequate servicing, support, training and maintenance.

Mr Smith may well know how to access his bank account online or buy a CD, but he might have problems if he wants to change internet provider.

Buying an existing business in support or training is probably the easiest way to enter a growing market, although of course you will need some expertise and skill. This is one area in which prior experience is a must.

So, in short, there are many ways to enter this varied field - and one suiting every character, whether you are a backroom boy or an entrepreneur.

It may have seemed that the tech market was doomed only a few years ago. It has always been obvious that the IT and computer industries have become vital parts of our lives and are not going to vanish because of a few rash past business decisions.


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