Emergic: Rajesh Jain's Blog

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Tech’s Deeper Problems

October 24th, 2002 · No Comments

The Customer’s Revenge is the title of a Forbes story which says that “for 20 years businesses obediently bought into every new release that high-tech vendors foisted on them. Never again. Their new reluctance bodes ill for a long-awaited rebound.” Continues Forbes:

High tech is in deep trouble, and that owes to more than the economic downturn. The doldrums will end eventually, but for years to come tech vendors could be hampered by basic changes in how businesses spend $375 billion a year on technology and what they demand from it. Part of the problem is an industry that has innovated to the point of self-annihilation. Hardware and software makers pushed ever shorter product cycles and provided ever more power for the same or lower price, flooding customers with capacity. But many big customers have gone the opposite way, slowing and extending their own buying cycles and focusing on how to better use what they already own. Perhaps worst of all, some big spenders have lost their lust for the promise of new technology. Amid this customer ennui, no Next Big Thing–the fabled “killer app” that drives every boom–has yet emerged to offset it.

Here’s a model of the future: “Web-based software from Salesforce.com competes with Siebel Systems, and every business that “rents” usage from Salesforce avoids having to buy a server to run Siebel’s code. Salesforce serves all of its 5,000 accounts from two powerful Sun 6800 systems that together cost $1 million. That means its customers didn’t have to buy 5,000 servers costing $10,000 apiece. Net loss to the industry: at least $49 million. And counting.”

Is ther ehope? “Tech has bounced back sharply from downturns in the past, and it may yet do so this time. Reengineering fueled the tech market in the early 1990s, and the Web craze stoked tremendous growth thereafter. The question is what future feature might take hold. Intel–which keeps its own PCs about 15% longer than in the past–hopes a new wave of “multitasking” will chew up future processing power and says desktop video could help. More than half of corporate PCs have only one-fifth the processing power of today’s high-end chips. To multitask, they’ll need more.”

The writing on the wall for tech companies is clear. They’ve overshot the needs of their present markets. They have to get out of their comfort zone and open up new markets, touch new users, and create new applications.

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