Guidewire Group - A Social Media Enterprise: 2005 Predictions Revisited

2005 Predictions Revisited

A year ago I tried to highlight some areas of instability, opportunity, and uncertainty that might be resolved in calendar 2005. Reviewing this list, it's striking how little some things change (the DVD standards battle) and how much other industries (search in particular) simply exploded.

I won't march through the entire list but will instead highlight a few entries with comments in italics.

A is for Apple, which has to address some big questions. Having reinvented the mass-storage market by equipping the iPod with a great interface and compelling legal content, the leadership must anticipate the eventual margin erosion in the hand-held segment and decide how long to ride the premium-price position in computational jewelry (i.e., what used to be called PCs). Steve Jobs had a great '05 by any measure, cannibalizing his own markets with new, far superior products (the Nano) and getting new services (video) into the market before most analysts predicted. Even the one misstep, the iTunes cell phone, will be tied more to Motorola than to Apple. Regarding the prediction, it may be that Apple doesn't need to worry about the desktop or laptop markets.

B is for business intelligence, the fancy name for data warehousing. For information to enhance business outcomes, it has to fit more closely into real processes. The MBA analyzing data cubes has far less leverage than the people at the point of customer activity making better decisions in the moment. That objective means that data analysis tools will have to become more industry- and process-specific rather than generic, and they can no longer be so detached from operational systems. Looking back, B should have been for blogging, which evolved faster and delivered more mainstream impact than Cognos/SAS/Hyperion et al did.

D is for distributed development. The issue isn't really India per se, because there will be new low-cost environments for certain kinds of work as India develops inflation, a middle class, and/or heightened political tensions with Pakistan. Managing distributed development is a more general issue than merely signing up resources in India or Spain or Estonia, and the tools for doing so are still generally immature. The other story here was weather: tsunamis, hurricanes, earthquakes, and blizzards reinforced again how hard it is to manage infrastructure and business processes on a global scale.

E is for energy, which remains a constraint for everything from mobility, in the form of battery life, to data centers, in the form of heat. Intel recently had to switch over to dual-core processors to maintain its stream of new microprocessor introductions because of heat, and the marketing strategy for Centrino (slower clock speed, better battery life) doesn't immediately translate into a parallel pitch for desktop and server chips that will no longer be positioned solely on speed. The other energy factor that came into play this year was of course price volatility: running a cooler data center can repay in serious dollars not spent on utility bills.

F is for fiber optics, which remain a wild card in the the quest for widespread residential broadband access. Relatively speaking, Verizon is taking an aggressive position with fiber to the premise (rather than the node) in the Keller, Texas trial. Longer term, both capital and regulatory uncertainty loom. Meanwhile, wireless broadband deploys far faster and at lower cost, and it's completely possible that anyone who spends billions of dollars digging up yards in 2005 could be aced out by a wireless carrier within five years. Verizon and SBC/ATT continue to be caught in the regulatory conundrum of being neither conventional voice services nor cable operators as they try to enter the broadband sweepstakes. At the same time, one of the potentially huge stories of the year, if proved true, is the rumor that Google is preparing to deploy thousands of data centers (connected to fiber they have quietly been buying) to deliver applications over the network with low latency.

J is for jail. Sarbanes-Oxley section 409 is still being interpreted, but some provisions for timely disclosure took effect in August. The legislation uses the terms "real time" and "urgent" for these disclosures, which will add to the CIO's already substantial compliance burden -- and provide tough penalties for failure. "Real time" for some purposes is four days, but retrieving a given email or category of instant messages, for example, within that time is impossible for most organizations. Possibly in the manner of Y2K, this fear may have been overstated.

K is for killer application, or more properly the lack thereof. Intel has suffered as both consumers and business users find it difficult to justify new hardware purchases for tasks such as email, web browsing, and spreadsheets. On mobile platforms, meanwhile, cultural differences drive divergent adoption patterns of everything from mobile messaging to cameraphones to geolocation. Personal digital media management, in the form of iPods and TiVos, has sold well, but not all that well. In a global market, it's worth reflecting on total TiVo sales: 4.6 million for 2003, and probably less than 10 million total worldwide as of mid-2004. Much to the concern of many in the PC and related industries, this prediction came true, to the point where Dell had troubling results despite having some of the best managerial execution in the world.

M is for management software. Given that headcount remains a large and, thanks to health care costs, growing component of IT budgets, and given that the complexity of the IT shop is still growing despite efforts to rein it in, better tools for running the IT business are essential. Some are in early deployment. Consider that front office, back office, sales force, shopfloor, and field service all have been automated, but the IT organization typically runs on spreadsheets rather than audit-able, robust enterprise systems. Unfortunately, it's hard to sense how this is playing: Mercury Interactive, a leading company in IT governance software, is battling against being delisted from the NASDAQ after its CEO, CFO, and general counsel resigned amidst an investigation into financial criminality.

R is for RFID. Retailers already have the business case and many of the business practices in place to exploit the consumer-products and pharmaceutical tags; what will change dramatically are the behaviors and expectations in such places as hospitals, unionized warehouses, and courts. What are the rules for using tags (or automobile "black boxes") as evidence? What are the privacy rights of an employee suspected of theft or even of slacking? How will the black market adapt to the presence of tagged Oxycontin in both legitimate and shadow supply chains? While the big questions are no closer to articulation, much less resolution, the operational results appear to confirm the assertion that retailers, if not manufacturers, can benefit: a study done out of the University of Arkansas compared stores with RFID systems to stores without them and found that the former had 16% fewer out-of-stock events. Generally speaking, the industry average for stockouts is 8%, so a 16% reduction takes the number down into the high 6s. Dollar savings were not projected. (The other big R in 2005 was robotics, as four teams succeeded in mastering DARPA's Grand Challenge a year after the whole field failed in both mundane and spectular fashion.)

S is for search. Google's ambition and capability are both formidable: their agreement with leading university libraries to digitize some of their holdings parallels a less-visible effort at the Internet Archive and will be a landmark in information access. Yahoo, Amazon, and Microsoft, meanwhile, are devoting major investment and brainpower to various categories of search challenges. Given the magnitude of information volumes both at rest and in motion, traditional methods for storing, finding, and manipulating data will have to be reinvented - and more layers (in the form of geospatial, audio, and other aspects) are still in the queue. The arms race in search is astonishing, as are stock valuations. The big players are hiring talent across the world, and dispersing to do so: Google is opening a lab in Pittsburgh to get access to more Carnegie Mellon folks, while both Yahoo and Google are launching initiatives in New York. Microsoft, meanwhile, finds itself in an uncharacteristically defensive posture and has handed much of the responsibility for a reinvention to an outsider, Ray Ozzie from Groove, who came on board with the acquisition of the company he founded after leaving Lotus.

W is for Windows, still the world's most profitable software franchise. Security remains a major question mark, as does the issue of platform extension: how can Microsoft most successfully maintain look, feel, and branding across PCs, cell phones, game consoles, TV set-top boxes, MP3 players, handhelds, and home entertainment centers? Where does extension inhibit rather than enhance entry into new markets? Microsoft has confronted the security and reliability challenges head-on as it prepares for Longhorn, now named Vista, to launch in late '06. How well it has done so will shape the company's future prospects.

Z is for zero latency, otherwise known as real time enterprise. Driven by compliance requirements, customer requirements, and competitors, often from unfamiliar sectors, businesses often confront "impossible" performance requirements that can't be met simply by tweaking existing processes and procedures. As with so many other technologies, the really tough part of real time is behavioral and cultural rather than engineering. While IBM maintained its "On Demand" branding, the industry excitement for real time as a performance ideal feels like it's waning. Despite what is or isn't being said or written, however, the demands -- on people, on management technique, on systems -- will continue to mount as margins for error decrease.

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at January 16, 2006 04:16 PM

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