Eight Predictions
I've had some very thoughtful responses to the Macro Issues
newsletter, and I'll bring those into an upcoming edition. Because
January has already rolled around, however, it's time for some
polishing of the crystal ball. I'll repeat the fact, true since the
newsletter started in 1997, that I hold no direct financial positions
in any of the companies mentioned.
1) The second half of the year will be stronger than the first half in
the PC sector
Dell has been running uncharacteristically behind projections and
targets, as has Intel. My guess (and it's nothing more than a guess)
is that enterprise IT shops are holding off buying PCs until Microsoft
ships Vista: why would you want to deploy thousands of boxes in
February only to have to upgrade them less than a year later?
Microsoft, meanwhile, is ramping up the machine for its most highly
publicized and marketed product launch ever.
2) "Services" will become the corporate IT buzzword outside IT
Services-oriented architectures, or SOAs, have soared in recognition
in the past 18 months, and vendors are responding: you can see the
term on Oracle's and BEA's front web pages, and extensive marketing
support is showing up at HP, IBM, and SAP. Two questions should be
kept in mind: 1) As one senior architect at a Fortune 50 company told
me, "If SOA is the answer, what was the question?"
2) I defy anyone who's touting SOA to name the architecture it's replacing.
3) Google will launch a breakthrough business outside web advertising
The stock price contains lots of speculation that the company will
reinvent another market, and downward pressure on that price along
with increasing competition will perhaps accelerate the entry into the
data center, Internet telephony, network computer, or other adjoining
space. To hedge my prediction, the breakthrough new application may
still be in public beta as of December 31.
4) HDTV will have collateral effects
After at least two decades of being a commodity item eclipsed in
allure and economic power by the PC, the television is returning to
primacy as a driving economic force. (To be fair, HDTV is in some
ways a hybrid of computing and video display if you consider how much
processing power is required for smoothing algorithms, for example, or
how important computer memory is for the base technology.) Cable TV
coax, for example, can't support as many HD streams into a residence
as fiber can. Demand for those streams will somehow benefit
fiber-focused companies, like Verizon and SBC/AT&T. Similarly, demand
for HD-caliber content will force the Blu-Ray and HD DVD camps to
reconcile. Finally, demand for flat-panel HD displays is driving a
rapid increase in price-performance relationships, favoring efficient
companies like Samsung over rivals with less disciplined supply chains
and slower new product development.
5) The relentless reinvention of business markets by the Internet and
digitization will continue
Here's a top-of-mind list of businesses that have had their economics
radically altered thus far:
-travel agents, hotels, and airlines
-record labels and music distribution
-newspapers
-computer programming
-dating and matchmaking
-telephony
-photography
-computer and network hardware
-video rentals
-advertising
-retail
-government services such as motor vehicle registration, unemployment compensation, or the mails
-electoral politics
-secondary markets like garage sales, auctions, antique dealers, classified ads, and flea markets
That's a lot of change in a decade.
Who might be next? Television is my best guess, given the presence of
Apple (iPod video purchases), Microsoft, Google, Yahoo, Cisco (with
its newly-purchased set-top box business), and AOL/Time Warner along
with the RBOCs: that's a lot of intellectual and financial capital
being focused on a mature industry that is becoming more digital every
day. Automobile manufacturers and dealerships, health care, and
education are further down the list of potential breakthroughs.
6) The quiet march of robot progress will continue
iRobot now has two consumer offerings, a vacuum cleaner and
floor-mopper, to go with their four publicly announced military and
commercial products; the company sold almost $100 million worth of
products last year. Stanford and Carnegie Mellon both enjoyed
spectacular success at the 2005 DARPA Grand Challenge: a year after
every vehicle in the field failed, some literally crashing and
burning, five driverless entries completed a 132-mile off-road path.
Countless industrial tasks are accomplished robotically with products
from companies including ABB, Epson, Fanuc, and Panasonic. The fact
that much of this innovation happens away from public relations firms
and tradeshows like CES means that it's hard to get an intuitive feel
for what's happening below the radar.
7) Sensors and other location-awareness technologies will make the
news for an unexpected consequence
In 12 years, the EZ Pass electronic toll collection system expanded
beyond New York, New Jersey, and Pennsylvania to reach from Maine to
Virginia and as far west as Illinois. Such systems can facilitate
other objectives as well as increasing traffic flow: variable road
pricing (as is the case in London and elsewhere), crime-solving, and
payment tokens. RFID tags are used by horse breeders (and have been
for roughly the past 25 years), wildlife biologists, and supply chain
managers. Cell phones can be both bar code readers (in Japan and
probably elsewhere) as well as beacons. Sensor communications are
becoming standardized, as with the ZigBee protocol for building
automation and other tasks. The bottom line is that a system designed
to do one thing will be manipulated to do something markedly
different, and the side effect will be newsworthy.
Cell phone providers, for example, know how fast traffic is moving
because of how fast their subscribers change cells. Will they sell
that information to news radio stations whose helicopters can only
cover one road at a time? RFID tags in passports can be read from a
far enough distance that the design criteria were recently changed by
the US immigration authorities to include a metallic shield. If
sensors are embedded in humans for authentication and payment, as has
been suggested, will muggers kidnap people rather than demand their
wallets? Who has the authority to download OBD II sensor data from
automobiles, which can record how fast a vehicle was moving along with
other parameters? Can such data be subpoenaed in civil litigation?
If drivers don't want governments tracking their movement, it's often
harder to pay tolls with coins than use transponders - and even then,
the toll booths frequently record license plate numbers to catch
evaders. What are the actual costs and benefits of anonymity versus
facilitating tracking?
8) The developing world will once again make headlines for innovation
and not just cheaper production costs
Brazil is leading the world in some facets of cloning and alternative
energy development. China is developing a state-backed Linux
distribution. Korea leads the world in broadband deployment. The
Microsoft Developers Network has 6.5 million people in India, which is
second only to the U.S. What has been called the BRICK cluster -
Brazil, Russia, India, China, and Korea - is evolving extremely
rapidly, although the political instability of Russia is impeding its
progress as investors back away. Look for a major announcement from
one of the four remaining countries, potentially in biotech, optics
and displays, or networking.
--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 31, 2006 07:45 AM
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