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In a scene reminiscent of an episode of X-Files, the New York Society Of Security Analysts planned to hold a conference on September 12, 2001 entitled, "Anatomy of a Corporate Crisis: Managing Distress." Sadly, the conference never took place. The site of the conference had been slated to be a conference room on the 44th floor of the North Tower.

Rather than hosting business executives for a debate on the impact of the waning economy, the Society instead used its Web site to count heads and reassure family and friends that all its employees had managed to evacuate the 44th floor before the WTC's collapse. By vicarious extension, Americans across the country and across the globe initially felt the impact of this seemingly impossible disaster to be the harbinger of some sort of economic doom.

Universal initial reaction to the events of September 11 have been fearful. The horrific events in Washington and New York have left the nation numb and spread worry that an economy already on a downhill slide could be pushed over the edge, impacting the software and tech sectors particularly hard. However, first evidence based on key leadership attitudes in industry and government, as well as consumer sentiment, surprisingly seem to indicate otherwise.

An IT capital equipment and software poll conducted by investment banker Morgan Stanley of CIOs of 225 major corporations across the Nation found that 19% are reviewing plans for large defensive technology purchases as a direct result of the September 11 terrorist attacks on the Pentagon and World Trade Centers. 33% replied that it was too early to tell what measures should be taken or whether the attacks — which killed nearly 6,000 Americans and world citizens and turned New York and the Pentagon into a war zone — would affect their spending or overall technology strategy.

31%, however, said they would most likely stick to capital spending plans with only minor modifications, according to the poll that was completed on October 2. The survey found that disaster recovery services and network security were high on the list of proposed changes, followed by projects to beef up current network and key database backup systems. These were seen as the most likely areas to be boosted as a result of the attacks.

While many execs took a dim view of the economy's prospects as a whole for growth in the 2001-early-2002 time period, few had immediate plans to throttle back further on advertising, sales programs, or headcounts until the situation had bee studied further. With the exception of the airline and tourist industries, few had immediate plans to cut back on IT capital spending for hardware and software, preferring to hold a wait-and-see attitude on economic and sales demand developments.

Software giants Microsoft and IBM appeared to lead the pack as potential beneficiaries of the proposed new capital spending increases, while new orders to RSA Security, Verisign, and other system assurance sources moved up to the second-place category.. While the bulk of planned spending increases were targeted at corporate growth and improvement of infrastructure, e.g., for upgrades to Windows 2000, office suite software, and Internet and expanded internal and supplier e-business activities, changes since September 11 reflected a desire to bolster operations assurance and both IT and physical facility security. These were followed by network expansion equipment, security software, and direct marketing e-commerce increases, which fell from their lead positions in August.

Economy: Dramatic Shifts in the Mix

Prior to the attacks, the tech sector was already in a slump as new startups found it hard to gain ground and market share in a downturn economy. The immediate impact on the economy over the first few weeks following the attack were predictable: business activity freezing, corporate expansion plans on hold, and sales of luxuries, travel, and restaurant meals at a dead stop in deference to the suffering of others. Direct impacts on the software and tech sectors including the postponement or outright cancellation of many seminars across the country in the September-October timeframe; the rescheduling and postponement of product releases and earnings reports and projections; and the loss of much employee labor in downtime or activities related to personal preparations for the uncertainty of what was to follow.

By October, however, most business concerns were back to normal in their core business lines. While, as expected, the events of September 11 trampled the stock prices of already-depressed startups and e-commerce-related companies on the NASDAQ, buyers and bargain hunters jumped in with both feet in the first week of the new month, rocketing selected stocks to double or triple their September lows. While it was predicted that most corporations would put off spending while they contemplated the true impact of events and focused on new economic and competitive pressures, a wide sampling of tell-tale economic indicators revealed this week an enormous spike in the purchasing of equipment and services for systems operations assurance appears to be in the making.

In particular, the software and computer services markets were seen to be one of the areas to quickly rebound. Analysts said security and operations assurance consultants and engineering design companies are showing an immediate increase in demand for services and ad-hoc purchase orders. The telecom sector was overtaken by an unexpected demand for cell phones, secure channels, Internet and other news links, immediate Federal, State, and Local computer and communications equipment purchases, and a large boost in orders to Cisco and others for network security devices and materials for the construction of redundant lines.

Clearly, the attack and new sense of vulnerability has redefined the business market for technology services and equipment, a representative of the research group Strategy Analysis, Inc., said. Mysteriously, while brick-and-mortar retail sales dropped through the floor during the weeks immediately after the attack, online sales jumped in excess of 45% in the same period — despite the fact that most purchasers assumably knew that cargo planes required to deliver the merchandise had been grounded by Federal order. Other counter-intuitive trends included the reports that pizza sales and other delivered fast foods nearly doubled at a time where restaurant sales nearly collapsed.

Despite the evident and severe negative short-term impact on the economy, the aftermath of the world's worst terrorist attacks could, in the long term, fuel a more rapid recovery in the economy than might have otherwise been possible under the formerly-expected 'normal' business-downturn conditions, according to a bulletin report by the University of Pennsylvania's Wharton School of Business Management. "Historic analogies have not always been clear," cites the report, but in recent times of war or when there has been a national security threat, economic downturns have flattened out and healthier growth periods experienced a substantial upturn in response to the situation.

Beyond the latest round of Fed and Treasury interest rate cuts, which now have brought the prime down to 2.5%, the Government is injecting masses of investment into the airline industry, social "safety net" programs, FEMA and other disaster planning, preparation, and recovery programs, weapons and material acquisition and procurement programs, and even steep boosts in international aid to select countries in order to smooth the way for American participation in the hunt for terrorists in some far-off corners of the globe.

Deficit spending has made this possible, says the report, and this has been the practice of Administrations back to the times of the Great Depression. Increased government spending is sure to act as a stimulus, since concerns about budget surplus shepherding, inflation potential, and Social Security soundness now pale in comparison to fears about national and civilian security. The report cites that companies in the telecommunications, software, security, defense, and teleconferencing sectors could be among the first to substantially benefit.

General Software Sector Hit Hard

According to analysts at Morgan, in the short term, the events of September 11 have impacted several major software companies struggling to make major multi-million-dollar deals, including Oracle. "To do large, multi-million dollar software deals, you need to have those face-to-face meetings." While the firm cut forecasts and estimates for earnings in the current quarter for software makers like PeopleSoft, Siebel Systems, IBM and Microsoft, forecasts for revenues and market share remained unchanged or slightly higher for the first quarter of next year.

B2B Spending May Be Reduced

While the collapse of many paid-for-transaction B2B services and the auto sales slowdown hit B2B software and service providers relatively hard in the last quarter, reaction to the events of September 11 have seem to have a positive effect on recovery sales. CIOs interviewed in these companies stated that having orders, order status, and delivery status online, well-backed-up, and on the books of two or more companies would be a distinct advantage over trying to guess the state of a destroyed paper trail, as the news-bureau footage displaying a paper blizzard occurring in the aftermath of the WTC collapse shows.

Terrorism May Induce Changes in the Supply Chain

Security of the supply chain and the ability of companies to continue operations has now become paramount in the minds of manufacturers and any company or government entity requiring the delivery of goods and materials over any appreciable distance. The shock induced by the Federal Government's grounding of air cargo as well as airlines has shaken manufacturers, including most of the largest such as GE and GM, to their roots.

The chairman of Global Transportation Services predicted that "This thing will affect the whole supply chain, regardless of the business sector." Some companies were forced to fly critically-needed parts to their plants on private executive jets gutted of seats in order to meet contractual or production schedule obligations, but had to do so at an enormous loss.

Without special supply chain and logistics software containing capabilities for contingency planning and alternate delivery means to which a shipper might switch, companies depending on just-in-time delivery methods now stand to have to make a desperate choice between high inventory costs and angry customers or canceled and lost sales. According to the analysts, therefore, a huge boost in logistics and supply-chain software, as well as additional coding to systems grown inhouse, is expected.

Telecom Industry Combats Terrorism and Security Concerns

Current anti-terrorist and national defense laws already on the books as a result of Congress' passage of the Administrations proposal in the week of September 24 already require massive rethinking of corporate, Government, and national networks, data communications, telecommunications carriers, and telephone systems, not to mention the need to beef up the Internet and most commercial Web sites. Consumer reaction to the terrorist incidents has already driven purchases of cell phones, pagers, and text carriers like wireless Palm and Blackberry devices through the roof.

"I can't get enough of them" to satisfy demand, said Bill Wilkinson of the Sprint office in McLean, Va. Other front-line offices, such as CISCO's secure router sales branch office in downtown Washington, D.C. are flabbergasted. "We're getting over 300 calls per day on just our twelve lines. We're flooded, and I haven't the heart to tell them we've been stocked out since last week and have no hope of re-supply for at least two or three more."

The war on terrorism declared by world leaders will embroil the telecommunications in wholesale re-evaluation, redesign, and revision of the regulatory framework to improve national security. That will mean significant changes in the way telecommunications providers operate globally, and it will incur significant extra costs for enterprises. Both must negotiate with government regulators to ensure that new policies achieve their goal of protecting national interest while minimizing the impact on business.

Vigorous demand for enhanced security in networks and telecommunications systems — both commercial and corporate — will stimulate a wave of new hardware and software developments. These include designs to address a significant array of intersecting technical and policy issues:

Greater government surveillance of fixed and mobile communications, both nationally and globally.

Dramatic curtailment of new spectrum allocations and auctions — e.g., in the United States, wireless carriers needing more frequency bands for 3G services will have a harder time getting the Department of Defense to release additional spectrum 'real estate' that it was awarded by Congress. This will require new hardware and software technologies, as these carriers attempt to compress more traffic into narrower bandwidths.

The $50 billion anticipated from the sale of the 3G piece of the spectrum may be taken off the table.

Studies by the DoD, National Telecommunications and Information Administration, and the FCC reviewing the 1.755 GHz to 1.850 GHz band to support the base frequencies of 3G may be indefinitely extended.

Network security methods, including encryption and back-door access allowing the Federal Government to, via satellite triangulation, monitor cellular calls and the location of callers.

New demands for service providers to work alongside governments and security agencies to identify potential national security threats.

Heightened oversight responsibility for regulators, and new technologies, software, communications equipment and instruments needed to permit extensive monitoring

Renegotiated global and regional treaties impacting transport and backbone throughput and efficiency.

With so many changes now being proposed at the DoD and Department levels, even before lesser players get in the act, boom times for telecommunications equipment and software providers and contractors is assured for at least five years out. Currently, for example, NSPs (Network Service Providers) do not bear legal responsibility for any harm that may occur over the lines or result from what users may communicate or initiate online, and the NSPs are not required to monitor or police data communications content or traffic. However, in light of current events, the Federal Government may force NSPs to take a degree of responsibility for what passes over their networks — and this would involve additional expense for a telecommunications industry already feeling the financial pinch of the economic downturn. If Government agencies begin extensively monitoring the lines, it may only be a matter of time before consumers feel less free, in which case the increased regulation could easily do damage to the future and promise of many companies' e-commerce business models.

Telecommunications carriers, equipment and software providers, and TC customers can now expect the gradual emergence new regulatory framework oriented towards national security and significantly affecting the way they do business. Their primary effort should therefore focus on working together with U.S. and international regulators to develop the framework that best addresses national and business security needs — without crippling the best network and communications in the world and in history with unnecessary and debilitating security "knee-jerk" measures.

Online Ad Market Reacts to Events

Despite the distraction of the nation's attention from normal purchasing activity and consumer-goods Web sites, a sudden burst of online advertising has occurred, as e-commerce companies and major manufacturers suddenly fear collapse of demand for their products. "No increase in advertising can take place as quickly as online advertising," the analyst from Morgan Stanley said. "These retailers of size know that, because of the raised apprehension levels in their traditional consumers, they have to act quickly to retain customer interest."

For the great majority of Web sites, which deal in news and information, the attacks brought record audience numbers as nettizens looked up everything from Islamic history to medical conditions that might be relevant. Government Web sites were universally swamped, with response times longer than most browsers could support. Consumers glued to the TV and afraid to venture out of their houses, spent huge amounts in Web purchases of stock-up items such as non-perishable foods, medicines, books, video and music CDs, flowers, cards, and emergency loans, as well as such civil-defense-related items as gas masks, cell phones, new computers, first aid kits, weapons and martial-arts manuals, locks, alarm systems, and other security- and home-defense items. In the three weeks since September 11, coverage per click-through jumped from 463 per average site-day to 788. Online advertisers rushed to grab capacity as cost-per-head dropped from 28.3 cents per product purchase to 16.7.

Attacks Give New Boost to Web Services

Outsourced services, such as Web hosting, e-mail, and Net infrastructure management have seen a lack of demand in the past year as corporations spent more carefully amid the U.S. economic downturn. But fears brought on by recent terrorism and the related potential for lost data may spur businesses to turn to companies such as Exodus Communications, Digex, Loudcloud, Critical Path and other Internet service firms. Industry sources think the events of the past three weeks will spur the industry toward using more off-site backup and disaster-recovery services. "As far as external hosting and ASPs go, if you had 10 reasons to process off-site, you now have 11," said the Strategic Research analyst.

Drawing a parallel analogy, many corporate and government IT offices had real concerns about the Y2K bug, and this prompted many businesses to consider outsourced Internet and communications services providers for reasons of better security and operations assurance, particularly in the areas of data backup, off-site storage, and hot-boot disaster recovery options. Similarly, any risk to physical facilities due to terrorism, or even risk to daily processing and network support due to an Internet cyberwar launched by overseas hackers, puts pressures on executives and Government IT managers to leave the corporate 'nest egg' with experienced professionals having the advanced technical know-how to ensure that data is backed up safely with certainty and hackers' intrusions and viruses can be detected and foiled.

New major players are gearing up for the disaster recovery market segment onslaught. Intel Online Services, the chipmaker's Web hosting and ASP data center unit, is anticipating a major need for disaster recovery services. As a result, the company late in September created an Emergency Technical and Data Center Services Hotline group and posted notifications in online advertising to major U.S. technology-oriented Web sites.

It stands to reason that corporations may be more apt to geographically disperse their data at regional data centers, which would logically lure them to the major Web hosting and contract data processing companies. "We are definitely seeing a trend as companies re-evaluate their IT structure and vulnerability and take a second look at their outsourcing and data center needs."

CIOs: Make IT 'Bulletproof'

No period in the software industry's history will shape future IT strategies the way September of 2001 did. Any CIO or business decision-maker or IT manager who doesn't view the incredibly tragic events of the terrorist attack, plus the enormously-damaging two Internet worms which opened clear vulnerabilities to corporate and Government data on many formerly 'safe' servers, as a major "Wake UP! And Smell the Coffee" call to make their sensitive and mission-critical operations bulletproof should be thinking about the pleasures of retirement in Hawaii.

In the new millennium, dependence on computers is endemic. IT and organizational lifeblood are now synonymous. Building and evolving the right IT infrastructure — one that can, within the limits of reasonability and reality, assure the continuance of business operations — has become the first imperative of the new post-carefree era.

Bulletproofing IT goes well beyond traditional security-related issues: it now includes being ready for any disaster — cataclysmic, external or environmental events such as earthquakes, tornados, or even war — which cannot be forecasted, which businesses and governments are powerless to prevent, and which could seriously damage the information infrastructure of an organization.

One can imagine that post the WTC tragedy, surviving employees have no idea of what paperwork they may be missing, let alone what to do about it. Good bullet-proofing and disaster recovery plans make sure that the employees responsible for shoring up an organization's information assets anticipate and discover weaknesses and vulnerabilities in critical business processes, deploying effective backup-and-assurance solutions that roll up into the organization's broader disaster recover initiatives, much as insurance and finance companies have regularly done.

CIOs are now taking the long view to the disaster recovery challenge, re-examining old assumptions and re-evaluating how business processes have changed in their companies since their last recovery plan was formulated. New compromises are being struck between the costs of bulletproofing IT and providing top management with systems for operations assurance — costs which are not inconsiderable — and the true level of protection they provide.

Beyond the 'grand plan' of disaster recovery preparation suites offered by leading companies in that field, there is a lot that can be done that is not immediately intuitive. For example, an organization could decide to go 100% "paperless," installing systems and business processes that made sure most documents and non-telephonic messaging originated or were processed in the electronic world, and that paper output is only a secondary or tertiary effect for easier reading or for brochures.

In some instances, though, paper is received from the outside. Minolta makes a unique system for organizations not having an explicit policy of scanning or imaging — it captures all images from an offices copy machines and stores them in an off-site giant repository for a rotating period of six months or more. Every copy is associated with an employee or project code and time and date stamped. It is a wonderful system, if even used merely for locating "that project list that Joe came up with eight weeks ago."

For 100% paperless offices wiped out by the unanticipated event, Microsoft's centrally-managed IntelliMirror or Citrix's Metaframe would allow a user to start working on a newly-rented PC at any offsite location with phone service — as if it were his or her own — on the same day.

To protect against Internet worms, according to the Gartner Group, it is only necessary to replace Microsoft IIS servers with one of the more secure Unix- or Linux-based servers readily available.

While personal firewalls (software for the desktop workstation or PC) were originally designed for individual users, they turn out to be excellent bulletproofing against malicious email attachments — and they stop a much wider and more complete variety of bad attachments and emails than any of the special email security servers available. Consequently, they provide the best protection for corporate email users who can't resist the temptation to open attachments — and this is critical, since many of the worms and Melissa-like viruses can, once opened, infect the entire organization's network once just ONE attachment is opened. These software solutions can be used together with centrally-administered desktop firewall managers like InfoExpress's Cyber-Armor.

Disaster Recovery and Backup Companies doing a Land-Office Business

If last week's terrorist attacks on the WTC and the Pentagon were in any way intended to bring the defense and information systems of America to its knees, the terrorists indeed struck the wrong buildings. Virtually all the companies in the World Trade Center, and definitely every aspect of the Defense Department's operations at the Pentagon, have been backed up for some years and well-prepared through the use of disaster recovery dress rehearsals. These companies and government offices have had the most thoroughly planned backup and recovery operations anywhere — enough to get the bulk of operations of each office back to core business handling capacity within a matter of three to five days.

Employees, their preparation, and their training in disaster recovery situations is the principal success criterion for a good recovery plan. The sole exception to the speedy recoveries, for example, was the bond-trading investment banker E-Cantor, which lost over 95% of its employees. Most of the companies in the WTC were financial companies, noted for their recognition of the importance of protecting their data and continuing business operations in even the most adverse of conditions.

Backup systems for these companies included a wide array of custom consulting firms, computer service firms, and supporting software providers such as Oracle, IBM, Microsoft, Compaq, RSA Security, Comdisco, SunGuard Data Systems, and others. Many of the operations assurance providers, particularly for the insurance companies, had offsite hot-boot parallel systems no older than one week of currency up and running within three days and the companies were using their services to continue the conduct of business.

The WTC event has reminded top execs of companies and government offices that depend on computers (i.e., virtually all) that they have probably not adequately thought about increased needs for disaster recovery. Whereas hardware can be immediately replaced by backup hardware, for software systems and critical data, it's not as easy: years of software, systems, and communications reconfiguration, plus overlapping archived data sets, can pose an enormous labor threat as a business or agency tries to reestablish its systems to reflect the current state. This, in turn, has spurred an increase in capital spending for better and more secure hardware and software as well as newly-commissioned external computational services, which bodes well for the software and technology sectors at a time when shifts in the mix of the consumer sector and a general downturn in the economy could pose problems for other sectors and industries.