From the BBRS link I posted this morning - lots of good reading here!
If we could find a good company, this might be a good investment area.
Message 8958737
The Future of Technology: Communications is the millennial tornado!
A really big tornado is forming on the horizon. Bigger than the world's telephone
network, more revolutionary than the Internet, and with the potential to create
more wealth than the PC industry. In our opinion, the next tornado will be the
deployment of a broadband, packet-based public network. We expect that this
new network will be similar to today's Internet, eventually will be as ubiquitous as
the traditional telephone circuit-switched network, and will have performance that
far exceeds that of today's fastest enterprise networks. However, it will not be
simply an extension to today's Internet; we expect it to be completely new, much
bigger, and to have a far greater impact on our lives.
A quick tour of the history of the technology industry lends insight into what the
future will bring. In technology, the 1960s were about mainframe computers. The
1970s were about minicomputers—making smaller, cheaper mainframes. The
1980s, microcomputers—distributed processing for the masses. And, the 1990s
were about enterprise networks—connecting all that processing back together.
Following these powerful technology waves, in our view, will be the beginning of
another tornado—broadband, packet-based public networks—connecting
everything to everything.
The transistor was invented in 1949, the integrated circuit in 1958. Moore's Law
predicted that IC density, and similarly, IC price/performance would approximately
double every 18 months. Compounding this rate produces a 10-fold increase in
performance every 5 years and a 100-fold increase every 10 years. This 100-fold
improvement in performance produces such a flood of raw functionality that it
creates a complete technology discontinuity approximately every ten years.
Because of the timing of the original two inventions, the transistor and the
integrated circuit, these discontinuities tend to fall on new decades. If this
fanciful discussion has any merit, then with the new millenium, a new tornado is
looming, and behind that lies a new technology industry.
Each new tornado has generated incredible amounts of wealth. But fascinatingly,
each tornado has always been driven by a new set of companies—the established
players from prior tornadoes have rarely had much impact on the newly formed
industry. The historical record is conclusive in this regard, in our view. Although
IBM dominated the mainframe industry, it was only a second-tier player in
minicomputers. IBM practically defined the PC market, but was ultimately only a
second-tier PC vendor, and the company was essentially a no-show in enterprise
networking.
DEC was the dominant vendor in minicomputers, an also-ran in PCs and not much
of a presence in enterprise networking. Microsoft, Intel and Compaq have been
wildly successful companies in their own right, having completely dominated the
PC industry, but none of them has had any meaningful play in the market for
enterprise networks. The newest tornado-conquering gorilla to emerge has been
Cisco. There is no debate as to whether Cisco is the dominant vendor in the
market for enterprise networks.
However, in light of the fractal structure of each past tornado, history strongly
suggests that the next tornado will produce new vendors and at least one of
these vendors will eventually join the ranks of the mature technology
gorillas—IBM, DEC, Microsoft and Intel, and Cisco. Although hard to envision in
1999, we believe there is a new gorilla in the midst.
If this essay had been written in 1969, it would have been hard to believe there
would be a challenger in computers to IBM, but then along came DEC. In 1979, it
was hard to believe anyone would challenge DEC and IBM as leaders in
technology, then along came Intel and Microsoft. In 1989, the general feeling
would be that we would never see another company with the wealth creation
potential of Microsoft, and yet today we all watch Cisco with great respect. It
likely will happen again, as history is our guide.
Most people believe that the Internet is here to stay and packet-based networks
are the wave of the future. But what most people do not fully appreciate is that
the Internet is dead, and that what is coming next will make the current 'net look
like child's play. In 1989, an enterprise could build a respectable enterprise
network using DEC NET. However, those networks were simplistic compared with
the enterprise networks built today. We believe the same comparison will be made
in 10 years when comparing the future public networks with today's Internet.
The current Internet was never designed to handle the traffic needs of the
applications that are being planned or deployed, and the circuit-switched network
will not scale despite its ubiquitous access. We expect that the new networks will
look like the Internet, but will offer much greater scalability while at the same time
offering the robustness and ubiquity of the current circuit-switched network.
So who are the IBMs, DECs, Microsofts, and Cisco's of the new network wave? In
other words who are the next Gorilla-candidates? It is definitely too early in the
market development to crown the gorilla in this market, but there are several
rather impressive start-ups that have a real shot in our mind, and most
interestingly, all of them are still private companies.
These entrepreneurs are combining the best from the data world with the best
from the traditional telecommunications world. Internally we expect that these
systems will benefit from Moore's Law, modular software, and standards based
interfaces and protocols, and externally we expect that they will be fully
redundant, carrier class, and NEBS compliant. Think of this as Moore's Law meets
the Telecosm. These devices already offer 50-100 times the performance of
existing equipment from traditional equipment vendors and have Moore's Law
designed into their futures.
Two general aspects distinguish these companies, and this tornado, in our mind.
First, these start-ups are packed with experienced management and engineers.
Many of the managers are on their second and third start-up, with 20 plus years
of business experience, and the senior engineers have produced several
generations of successful system designs. Second, these companies have
business plans that account for the dominance of Cisco, Lucent, Tellabs and
Nortel Networks.
Guess what, for them the existence of the established vendors does not matter…
it's not their tornado. |
