Tuesday, January 03, 2006

December 2005 Early Indications: 2005 Predictions Revisited

(distributed 12/19/05)
A year ago this week 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 after a double asterisk.

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 e-mail or category of
instant messages, for example, within that time is impossible for most
**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 such predominant tasks as e-mail, 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. (http://www.rfidjournal.com/article/articleview/1927)
(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.