Thursday, December 02, 2004

December newsletter I - Trends 2004: Prediction Scorecard

Despite using or implying many automotive metaphors regarding dashboards, headlights, and rear-view mirrors, the technology prediction industry doesn't spend much time keeping itself honest about its hits and misses. Given that every other economic segment is being subjected to tighter scrutiny, we'll do likewise: here's a look at how we and other predictors (harvested from multiple sources) fared this year.

1) A lot of these developments were well underway a year ago, so something like an upswing in flat-panel display sales was no surprise. Similarly, megapixel cameraphones were linear extrapolations of previous results and R&D investment. Continuing the "correct, but no surprise" category I'd list the following:

-Big money in search technology. The Google IPO and Microsoft investments were in the works for some time, and Amazon's A9, while fascinating, didn't change the established order of things
-RFID: Wal-Mart announced its mandate in mid-2003, so nothing snuck under radar.
-Increased investment in offshore capabilities - but John Kerry's campaign rhetoric made companies shy about public announcements.
-Price pressure across the tech sector
-Increased speed of cellular connections

2) A few predictions may or may not have come true, but confirming data aren't available yet:

-A 2x increase in the number of wi-fi hotspots. Anecdotally, I don't see anywhere near twice the coverage in my habit trails.
-Bluetooth, by contrast, feels more prevalent than it was a year ago, particularly in Europe. There, shipments of mobile phones with Bluetooth have nearly tripled in the third quarter vs. last year.

3) A few tech predictions simply didn't pan out:

-Enterprises have been wary of or even downright hostile to the idea of using peer-to-peer technologies for storage, distribution, and even cycle harvesting. Security, defined fairly conventionally and often oversimplistically, still trumps most discussions.
-Micropayments remain in the same category as voice interfaces: a good idea that people will embrace any time now. Except they don't
-Really Simple Syndication (RSS) is still overwhelmingly used for weblogs rather than enterprise content. There are some early adopters, but outside of media companies pushing news feeds, it's hard to find many instances of RSS in the general corporate population. Cisco, for example, uses the technology to distribute press releases.
-The Apple iPod completely dominated the MP3 player market; forecasts of credible competition and price erosion at Apple simply didn't happen. iPod shipments this holiday season will be counted in millions, Windows-based players in thousands.
-PCs and TVs, in the mass market, are different animals. HDTV is getting hot, but not with a lot of PC infrastructure.

4) The hits among the misses: predictions that appear to have come to fruition.

-Voice over IP is in hypergrowth mode, along multiple axes: corporate (Cisco), wild-card (Skype), old Bell (AT&T), ISP (Earthlink/Vonage), cable TV (Cox), and RBOC (SBC).
-Weblogging continues to increase, but the rate of abandonment is still high: about 1 in 2 blogs gets left to die after 6 months. The presidential campaign showed how blogs, in the aggregate, can be front-page news.
-Personal digital media storage (TiVo and iPod) continued to grow faster than most technologies. With small high-capacity hard drives and capacitive scroll-wheel interfaces like the iPod's now coming to cell phones, the market reaction will be fun to watch.
-Computer gaming in its many forms - portable, online, console- and PC-based - continues to grow dramatically, to the point where the industry is bigger than first-run Hollywood movies and also a cultural vector for norms and fads. Last month, for example, Microsoft's launch of Halo 2 brought in $125 million in sales - for the first day of availability.
-AMD capitalized on both good strategic bets and Intel's poor execution to make the general-purpose microprocessor market a two-horse race for the first time in years.

Looking closer to home, this list of six mnemonic "M"s summarizes what Americas CTO John Parkinson and I predicted last November for the 2004-07 period:

-Miniaturization: "mobile networking, presence awareness (primarily via GPS), and machine-to-machine data and communications standards will co-evolve with advances in miniaturization, with the result that each realm delivers useful capabilities to the others."

-Mobility: "we can create many new types of mobile capabilities – and make both 'location' and 'locality' key properties of our business processes. Especially in North America, expect a lot of these developments to incorporate links through vehicles – which, as well as being robust mobile platforms that can shield their occupants from radiation, have the supreme advantage of acting as electricity generators. . . . more and more network traffic well be 'Device-to-Device' with software agents (rather than people) communicating with each other; when you’re talking on the scale of hundreds of millions of entities, human intervention just isn’t a possibility. The other requirement will be for giant directories, much like today’s Domain Name Service, to keep track of what’s where, where things are headed, and who’s allowed to see what information about a given thing."

-Mesh: "We will need new network topologies that are highly connected locally but only loosely connected regionally and globally. Networks designed like this have many powerful properties (self diagnosis and automatic repair, for example) and can be made to be extremely flexible and highly scalable [and] . . . eventually they will become the topology of choice for just about everything at the 'edge' of the Internet of Things."

-Management: "There are two facets to the management issue. First, keeping track and taking care of all the emerging varieties of mobile and/or connected computing devices will require new approaches to asset utilization, system design, and maintenance. The sheer volume of the world’s digital data production . . . means that metadata will have to become more serious business. . . . The other aspect of management will empower people to make better business decisions. . . . The complete emergence of the 'Real Time Enterprise' will probably take longer than our five year horizon, but most of the technologies we need already exist – and significant productivity gains are already accruing to businesses that embrace the feedback and control processes that make “real time” ideas work. . . . Adoption of real-time ideas is more likely to be constrained by the need to learn new working habits – and to become comfortable with constant monitoring and feedback – than by the availability of enabling technologies."

-Microsoft: "Over 95% of personal computers run a version of Windows, an operating system written for a hardware platform defined in the 1980s. Hardware has made such strides since then that the software now can’t take advantage of many of the available features – and attempts to do so have created obvious complexity and significant, expensive fragility as a result. It’s time to do something about this – and sometime in 2006, Microsoft will do so. The next release of Windows, currently code-named Longhorn, will significantly simplify how things work and at the same time expose many new capabilities from which to assemble a whole new experience when interacting with the technology. . . . This will of course have both intended and unintended consequences, but it’s worth recalling how important Windows 95’s embedded TCP/IP was for the growth of the Internet: Longhorn could well help unlock change of similar magnitude."

-Maturity: "Many industry observers ask if the technology sector is 'mature,' meaning, are triple-digit growth rates and investment returns still possible, or do hardware and software increasingly have the economics of automobiles or frozen carrots? Our take on the question is slightly different.

Let’s begin by looking at the core characteristic of information technology (and most other classes of technology) over its first fifty years: IT was scarce, and commanded the concomitant price premium. . . . The operating assumptions and design principles of a connected, mobile environment now revolve more around standards than differentiation, around services on a network than applications on a processor, around quality of decisions rather than quantity of throughput.

In short, rather than leaving some golden age of economic alchemy – of turning silicon into gold, as it were – the IT industry now addresses its most educated base of customers, who are competing for the highest possible stakes with ever more powerful and flexible technologies. The second fifty years of IT history promise to be far more dramatic than the first, and given possibilities in biology, education, politics, and transportation just for starters, it’s impossibly premature to write off the information technology market as a locus for growth and radical innovation."

So how did we do? Overall, reading a four-year prediction one year in should provide plenty of wiggle room. Nothing jumps out as truly bone-headed: software agents are probably more utilized than talked about, for example, and miniaturization is certainly driving solid growth in cell phones and iPods. Research into mesh network topologies is proceeding apace. If anything the organizational barriers to real-time technologies are even higher than we warned of. Margin erosion at most IT vendors keeps the maturity question front and center. IT management - of assets, people, and portfolios - remains a primary opportunity for both hardware and software vendors.

On the other hand, Microsoft's announcement that it was leaving WinFS out of Longhorn in order to make a 2006 ship date removes some of that OS's projected impact; some have referred to the modified release as "Shorthorn." Some of the biggest news of the year, such as new supercomputers, came from the Open-Source world. Google, meanwhile, is building much more than a search tool, and even the search facet got short shrift in our discussions of metadata and directories. Security, often the simplististic versions noted above, is still driving more behavior than we predicted, particularly in the adoption of web services and grid technologies. Mobility remains primarily a consumer rather than enterprise phenomenon. Overall, give us a B.

What do I think is coming for 2005? That's a topic for the next issue.