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Too many IT companiesI was perusing the Inc. Magazine 500 yesterday. This is a list of "America's fastest-growing private companies." While many of the case studies were surprisingly similar (owner bet it all, took risks, treats her customers and employees well, got lucky, dresses casually, etc.), one trend greatly disturbed me. There are too many IT companies on the list. As I scanned the list, I found that anywhere from 40 to 50% of the companies had something to do with information technology. They either made software, did consulting, provided telecommunications services, manufactured IT hardware, provided Internet solutions, or were IT staffing companies. While I didn't do a detailed survey (I ain't THAT motivated), I did look at the top 20 and the bottom 20. In the top 20, 13 companies fit my criteria of IT oriented - 65%. In the bottom 20, 10 fit the bill - 50%. So no matter how you slice it, in this particular list there are way too many companies that aren't doing anything more than trying to address other companies' information processing needs. To make it even more depressing, in the top 20, there were two companies that actually made things - 10%. The same ratio existed in the bottom 20. I was at a chamber of commerce meeting last week and we all had the chance to get up and talk about what we did. Of the roughly 30 companies that stood up, at least 10 or so were IT companies - either consultants, integrators or staffing companies. Only three actually manufactured actual pieces of stuff that went into other pieces of stuff. Now I recognize that I can't complain too much - I'm in the information technology business as well. But it scares me that half of us are essentially trying to sell stuff to the other half. And the stuff that's being sold isn't necessarily going to help Boris and Natasha make better widgets or sell more of them. It'll just help them analyze their company more thoroughly, and make much prettier graphs. If this keeps up, in 10 years we're all going to be software and consulting companies trying to sell to other software and consulting companies.
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