12-Year Tech Cycles

It struck me that major leaps in computing seem to be happen every 12 years or so. Start with 1945 – the ENIAC. In the late 1950s, IBM switched from using vaccuum tubes to using transistors. In the early 1970s, we had the invention of the microprocessor. In 1982-83, we had the personal computer launched by IBM. In 1994-95, we had the proliferation of the Internet.

So, the next big leap in computing should happen around 2006-7. What will it be? Google as the supercomputer? Longhorn? Cellphones as always-on, always-connected, computers? Utility computing? Wearable computers? Something unseen as of today…?

Telecom’s Problems (contd)

Om Malik writes:

Over the past two years, a new alternative to this last mile connection has emerged. This is the cable television network. The cable networks had long been dismissed as a clunky patchwork of disparate networks, of not much value except for beaming channels selling baubles and trinkets. In past five years cable companies have spent billions of dollars upgrading their networks for two-way communications, and thus becoming a viable option to phone companies copper connections.

This new last mile connection comes with high-speed Internet, which makes it possible to make phone calls over the Internet, cheaply. This is a marked shift from the traditional way of making phone calls. For nearly a century, when a phone call was made, a virtual circuit was created between the caller and the recipient. Expensive switches and other gear that cost tens of millions of dollars helped create these virtual circuits. Technologists have figured out a way to send the same voice traffic over the open Internet.

Powerful computers running a specialized piece of software that can do precisely the same thing for a few thousand dollars have replaced the old multi-million dollar switches. (This has already devastated two major switch makers, Lucent Technologies and Nortel Networks, which have seen a sharp decline in revenues and have let go thousands of employees.)

With a few thousand dollars, any one can set up a phone company, and go into the business of offering phone service. This has created a situation not so different from the early days of commercial Internet, when mom-and-pop service providers sprouted up all over the United States. There are dozens of these voice service providers, who are offering unlimited phone calls for as little as $20 a month. With nearly 33 million high-speed connections in America, it certainly is a big enough market.

What we are witnessing is commoditization of the only communications service that makes money: voice calls. As a result you have lots of large companies (and some small companies) with mostly unsustainable financial structure of the incumbents in a declining business, with massive and overwhelming fixed costs on their balance sheets. This is putting pressure on the ability of these companies to raise money from the debt markets, and is forcing them to cut costs mainly through continued lay-offs.

The next five years are going to be even more painful for the telecom industry, which will see its revenues shrink, and its suppliers vanish. This painful restructuring will eventually end with fewer and mostly likely with new players. Telecommunications adds up to a substantial portion of the US economy, and its continued troubles dont bode too well for the future.

Barron’s writes:

If you thought the communications business was brutally competitive, the Darwinian winnowing is just getting started. As the telephone, cable and satellite companies elbow their way into one another’s turf, prices will decline and companies will fail to meet their growth targets.

Welcome to the world of Susan Kalla, a senior telecom analyst at Friedman Billings Ramsey Group, whom we dubbed Dr. Doom three years ago (“Sell, She Said,” March 12, 2001).

She earned that moniker by slapping Underperform ratings on the telecom-equipment stocks she covered, a shocking move in the era before Sell recommendations came into vogue. Kalla came to her conclusion by polling the service providers to determine their demand for telecom equipment instead of heeding the rosy forecasts of CEOs. Investors who heeded those warnings were spared the agony of watching the equipment providers’ stocks shrivel to single digits.

Now she has broadened her scope to the entire communications industry — telecommunications, cable and satellite — and concluded that revenues will rise by less than 1% annually, to $274 billion by 2006. That’s far from the 4% annual growth the industry is promising.

The $17 billion shortfall means the industry has committed to too much capital spending and its bottom line will suffer. Shares of telecom players could fall 15% annually as competition heats up. The cable companies, which have higher debt levels and trade at loftier multiples, could face even greater risk.

“Everyone knows there’s going to be a war, but they don’t know the war is going to be this bad,” she states.

The cable and telecom markets, once clearly defined and with high barriers to entry, have started to merge into one giant, commoditized market. Regulatory hurdles have fallen in tandem with the price of equipment. So instead of having six competitors in the cable market and six competitors in telecom, there will be 12 companies going head to head. And each competitor will offer the same package of video, Internet and telecom services. “Bundle is a euphemism for discount,” she warns.

Is Avalon Microsoft’s Microchannel?

Phil Wainewright has some interesting thoughts on Joel’s essay on “How Microsoft Lost the API War”:

As Joel points out, web applications run on servers, and even if they’re written (as many of them are) to run on Microsoft servers, they can also run “pretty well under Linux using Mono”, so not only do they make Microsoft’s dominance of the desktop redundant, they don’t even guarantee it can retain a presence on the server. What’s more, there are plenty of efforts currently under way to add rich-client functionality to the browser environment. This is a big, rapidly growing market that’s crying out for a next-generation client system, but Microsoft has shut down any work on developing a better browser, and is instead gambling all on persuading the market to wait for it to deliver its shiny, new, Avalon-based Windows technology.

The demise of Windows would be one hell of a sea change, but Joel’s essay is creating a lot of waves because he’s made a very strong case that it could happen. I think Avalon sounds a lot like microchannel, and that makes Longhorn equivalent to the PS/2: marvelously engineered, but destined to be late, unpopular and ultimately one of the biggest mistakes in its creator’s history.

Nevertheless IBM did recover from its microchannel episode, and even microchannel technology itself was ultimately assimilated into the PCI bus that remains at the heart of modern PC architecture.

In ten years time, when applications run in rich browser clients, Windows will have settled into its legacy platform niche, the much-derided Avalon will nevertheless have made important contributions to subsequent innovations, and Microsoft will be working hard to re-establish the market position of Office having relaunched it as a web-based application. The company will seem remarkably chastened compared to its standing today, but it will still be a force to be reckoned with.

The World of a Google PC

Jon Udell looks ahead to how the “Google supercomputer” can transform Internet-scale software:

On the Google PC, you wouldnt need third-party add-ons to index and search your local files, e-mail, and instant messages. It would just happen. The voracious spider wouldnt stop there, though. The next piece of low-hanging fruit would be the Web pages you visit. These too would be stored, indexed, and made searchable. More ambitiously, the spider would record all your screen activity along with the underlying event streams. Even more ambitiously, it would record phone conversations, convert speech to text, and index that text. Although speech-to-text is a notoriously imperfect art, even imperfect results can support useful search.

Here are some of the ways the Google PC could exploit this data:

Bayesian categorization: My SpamBayes-enhanced e-mail program learns continuously about what I do and dont find interesting, and helps me organize messages accordingly. A systemwide agent thats always building categorized views of all your content would be a great way to burn idle CPU cycles.

Context reassembly: When writing a report, youre likely to refer to a spreadsheet, visit some Web pages, and engage in an IM chat. Using its indexed and searchable event stream, the system would restore this context when you later read or edited the document. Think browser history on steroids.

Screen pops: When you receive an e-mail, IM, or phone call, the history of your interaction with that person would pop up on your screen. The message itself could be used to automatically refine the query.

With managed metadata, these things are easy to do, and thats a key motivation for Longhorns WinFS storage system. But we dont have a lot of metadata now, and we wont have much anytime soon. So its worth reflecting on what Google has accomplished by brute force. Instead of idly slacking most of the time, our PCs ought to be indexing, analyzing, correlating, and classifying.

Intel’s New Chips

NYTimes writes about Intel’s “newest foray into the home computing market, blending performance, wireless capability and multimedia audio, video and image features into a set of chips that will be at the core of the next-generation personal computer.”

The new three-chip suite, which has been code-named Grantsdale, is also the clearest expression of the “innovation and integration” strategy of Intel’s rising star, Paul S. Otellini, the chief operating officer. That strategy is both a plan to lure consumers and a bet that Intel can create a new wave of growth in consumer electronics.

In a significant shift, the company, based in Santa Clara, Calif., will announce its fastest processor yet but will focus instead on the ability of the new chip sets to serve as a Wi-Fi base station, support a storage standard that protects against disk failure and allow users to view high-definition video and listen to higher-quality digital audio.

“The last major makeover for the PC happened in the early 90’s,” said William M. Siu, general manager of Intel’s desktop platforms group. “We’re trying to focus not just on technology leadership but on how people will use it.”

WSJ elaborates on the six key features:

  • PCI Express: Two to four times faster connections to graphics, networking
  • High-definition audio: Surround-sound; sends and receives multiple audio signals
  • Built-in wireless: PC itself becomes base station for Wi-Fi network
  • Matrix storage: Distributes data on multiple hard drives
  • DDR2 memory: Increases memory chip speed
  • Built-in graphics: Boosts performance without extra graphics card

  • It adds: “Grantsdale, and a companion chip set for gamers called Alderwood, are partly a response to the diminishing benefits of improving microprocessors alone. Paul Otellini, Intel’s president and chief operating officer, has pushed the company to develop combinations of chips that are tuned for specific computing applications, such as its Centrino chips for laptop computers with wireless networking. With these technology ‘platforms,’ Intel hopes to stimulate consumer demand while taking over a greater share of all the circuitry inside a PC.”

    Nokia’s Challenges

    The Economist has an analysis:

    Nokia really faces three distinct problems, argues Ben Wood of Gartner. It has lost its edge in design: many of its handsets look staid and dated. Today’s phones from other vendors are more stylish than many of Nokia’s chunky-looking models. This has nothing to do with clamshells, says Mr Wood. If they had been able to stay ahead with candy bars, they wouldn’t have this problem.

    Second, Nokia is partly a victim of its own success. It is hard to be cool if you are also the industry’s incumbent. Nokia’s dominance has made it a target for everyone else in the industry. Network operators, wary of being too reliant on Nokia, are increasingly turning to smaller vendors from Asia to supply handsets. Nokia’s reluctance to customise phones for specific operators, a policy it has since reversed, did not help. Finally, a reorganisation late last year, which created separate units for mass-market, business and multimedia phones, caused Nokia to take its eye off the ball. The reshuffle made sense strategically, but amid its enthusiasm to create snazzy new devices, such as music-player and gaming handsets, Nokia briefly forgot that most people simply want phones.

    Russell Beatie has some suggestions: “The focus on the basic phone though has to be job number one. They need to try simplicity and standardization first and innovate on the inside instead. Functionality over form. Go back to the basics of the 7650 and start again. Nokia has such a fear of becoming just another commodity-phone producer that they’ve been trying to differentiate themselves on every little design decision instead of just proving to all of us they know how to make a solid phone. Well that hasn’t worked, so it’s time to go back to basics.”

    TECH TALK: Tech Trends: Changing Landscape

    Technology touches us all – in every aspect of our life. Our digital lives have been transformed in the past ten years. Computers have digital representations of our personal and work lives embedded in our emails and documents, cellphones connect us instantaneously with family and friends, and websites assist us in the search for information and to complete transactions. Technological change continues to accelerate, providing the visionaries with an opportunity for that little extra competitive advantage which can make all the difference between market leaders and the also-rans.

    As we look at the various technology trends, it is important to understand the underlying forces of change and their evolution in the years to come. This is how new opportunities and business are created. Entrepreneurs need to make bets not on today, but the world of tomorrow. Since change is happening across many dimensions, it is also important to get a wholistic view of the world around us.

    In addition, there is a need to develop a perspective that centres around emerging markets. These are the next big growth markets and need solutions which are likely to be different from the developed market. Increasingly, many of the worlds largest technology companies are looking to create specific emerging market groups and solutions. The developed world has seen computing and communications evolve through many sequential revolutions: personal computers, local area networks, client-server computing, enterprise software, Internet, mobile phones and broadband. In emerging markets like India, all these revolutions are taking place in parallel. What happened in the developed markets over two decades is being compressed in the emerging markets in a few years. This means that more than just technology innovation, there is a need for agility, speed and localisation to tap into the opportunities by technologys newest customers.

    To put this context, take a look at India and the changes that are underway. Cellphone adoption is growing and the phone is morphing from just a voice device to both a possible alternative to a computer and is becoming a fashion statement. Computers are becoming a wee bit more affordable with the likes of AMD and VIA making inroads with cheaper processor. Broadband is starting to become available at reasonable price points. Open-source software creates an alternative to piracy and non-consumption. Internet e-commerce is starting to pick up with services like train ticket booking which remove a pain point in daily lives. As India develops, there is an opportunity to catalyse this change and capitalise on the millions of small businesses and hundreds of millions of people in rural India who will get integrated into the digital value chains.

    Technology is no longer a decision to be just made by the elite or IT managers. It is increasingly going to get embedded in multiple aspects of our lives. It is a weapon that needs to be leveraged by top management not just in the marketplace, but also across the extended enterprise. In this context, it is helpful to step back and take a look at ten key technology trends that we are seeing around us and understand their impact for our personal and business lives. For each trend, we will also look at its impact and opportunities in the Indian context.

    Tomorrow: Digitisation