So, I finished a suite of articles in BusinessWeek that were in my opinion far too rosy about the business prospects for the technology sector over the next several years. While they made a consistent argument about innovation not being “dead” in the tech sector, it is important to remember that innovation does not guarantee profits. Look at such companies/ideas as Satellite (sp?) radio, the good old TiVo, and mp3s for fantastic examples of innovation that have not led to profits, at least not thus far, and may never do so.
It’s important, too, when surveying the technology landscape that much of the infrastructure segments of technology, such as all but the highest end hardware, and much of today’s common productivity software, are all commodities. While providing a relatively stable cash flow, there is no large revenue growth associated with them. And for good reason, as nearly everyone who needs or wants them can afford them. It is as a presenter from the Vaccine division put it: when a vaccine is first launched, there is an initial growth phase where everyone “catches up”. Once that phase is complete, the growth levels off and revenue remains relatively constant in sync with the annual population. Many infrastructure suppliers face a similar situation. With the buildout complete at nearly all the global companies, these components will only be replaced as part of a regular cycle.
Those, too, looking for wireless and broadband to suddenly power a whole new revolution, like the one experienced during the late ’90s, are also likely to be disappointed. The wireless industry has already become relatively commoditized, partly as a result of the standardization that has occurred, while has led to adoption of low-end, inexpensive gear. I already am on my second wireless access point, having upgraded to 802.11g, and for under $100. And this is before the final 802.11g specification has been ratified by the appropriate standards body. While wireless will become an enabler of future applications, wireless itself is, to be frank, nothing but a piece of gee-whiz tech.
On the other hand, much of the value, from an enterprise point of view, will come from being able to collect, process, and exchange more data faster than ever before. Being able to put in place global business processes at multinational organizations will also provide a method of reducing costs, and much of this work at many large companies is still in progress. There certainly remains value in the adoption of technology, and new methods of integration will provide plenty of room for innovation. However, I expect that much of the future value of tech will not flow to the top lines (i.e revenue) of technology companies, but rather to the bottom line in terms of profits to those companies that are able to effectively adopt and deploy valuable innovations within technology. And, in my opinion, the BusinessWeek special feature completely missed the point by neglecting this.