Here is an interesting article that places a bit of common sense into the argument. That doesn't mean that some new surprise usages won't pop up. However, it does place an interesting perpective on issues.
businessweek.com
The article is dated March 21, 2001
Today's Tech Isn't Tempting Enough
Consumers and businesses alike are sated for now. It'll take big advances --
and a healthier economy -- to get them buying again
Over the past two years, Lisette Fernandez, a
30-year-old San Francisco marketing exec, has
bought a souped-up laptop, complete with
CD-ROM and DVD players. She has subscribed to
DSL service for ultraspeedy Net connections when
working at home. She scooped up a dual-band cell
phone for international travel, a Palm V handheld
organizer, a CD burner she uses to record CDs at work, and a second Sony
DVD player, hooked up to her TV. A self-professed "gadget freak,"
Fernandez says she would be lost without her technology tools.
But Fernandez' buying spree may be over. After all, what's left? "There's not
much I can't do with the technology that's available now," she says. "Until I can
buy tickets in front of a sold-out concert using my mobile phone, there's no
need really to upgrade my stuff."
DRAMATIC SLOWDOWN. Fernandez isn't alone. After years of phenomenal
advances in PC-processing power and the widespread adoption of cell phones
and personal digital assistants, Americans appear to have landed on a
technology plateau. PC sales are slowing dramatically. From 1998 to 1999,
U.S. PC sales soared 33%, from 33.7 million to 43.8 million, according to
Gartner Group. This year, sales are expected to grow only 10%. By 2003,
growth will be shaved to just 2.4%.
Fancy cell phones -- so popular in Europe -- have been a flop in the U.S. (see
"Cell Phones Call: Will America Answer?"). It turns out consumers aren't
clamoring for phones that carry data or play music. Sprint PCS' latest foray
into high-tech phones, the Uproar, is a case in point. Launched in December,
2000, the phone allows consumers to play MP3 music files on their handsets.
But sales are running about 50% of company estimates. Only PDAs, which
aren't as far along the consumer adoption curve, should see big growth. Sales
there are expected to double worldwide, from 13.7 million in 2001 to 26.3
million in 2003, according to Gartner.
As Fernandez attests, little qualitative improvement can be gained from buying
a faster computer or a more advanced cell phone. Even with broadband data
networks, there's not much difference between surfing the Net with a computer
with a 500-megahertz processor and one that's twice as fast because
bandwidth is more important than chip speed. Likewise, the data-delivery
networks for the latest generation of cell phones are so slow that most of the
advanced capabilities of newer phones inflict more pain than pleasure.
BLINDSIDED. Add to this mix a markedly slowing economy, and even tech
aficionados are having a hard time justifying paying anywhere from $485 to
$749 for, say, the new Compaq iPaq digital assistant, when their old handheld
device pretty much does the trick. Not to mention the thousands one would
have to fork over for a new PC. "There is just nothing at the moment that is
new and compelling enough that everyone has to have it," says Paul Saffo,
director of the Institute for the Future.
Who saw this coming? Certainly not the tech industry. Citing Moore's Law,
which states that microchip processing power will double every 18 months,
tech companies saw only upside. Most didn't plan for a day when they
wouldn't be able to wow people with fabulous new innovations and advances.
And who could blame them? Moore's law has held true since 1965. Then the
world's most complex chip, created by Fairchild Semiconductor, had 64
transistors per square inch. Today's Pentium 4 sports 42 million. But that alone
isn't enough to keep people buying.
Economists and technology watchers say the slowdown in demand could have
been anticipated if tech companies had been willing to consider past eras of
breathtaking innovation. They neglected to put in place strategies for
confronting slowing sales in the event of an economic downturn.
VULNERABLE TO THE AX. This failure was particularly pronounced in terms of
assumptions made about corporate info-tech spending. Throughout the 1990s,
the conventional wisdom was that tech buying was largely immune to the
business cycle. Just look at the growth of consumer and corporate spending on
technology in the first half of the '90s. Ethan Harris, chief economist at Lehman
Brothers, notes that that tech spending didn't slow during mid-90s because of
the rise of the Internet.
"That was an anomaly. Now with the pervasiveness of technology, it has
become such a big part of the budget, corporations can no longer treat it as a
special sector that is immune to the ax during a downturn," he warns.
The near-obsessive need to get online encouraged companies to keep
spending. That, in turn, led to the dot-com boom. Now, with the capital
markets in tatters and no must-have technology on the horizon, corporations
are going back to their old ways. "In a downturn, companies take a look at big
expenditures like technology, which are fairly easy to rein in, and ask, 'Do we
need this?' If the answer is no, they make the decision to skip an innovation
cycle," Harris says.
Consumer technology purchases, on the other hand, are mostly aspirational:
People want the next, best thing -- or the thing that can make their life simpler
or more fulfilling. Consumers buy cell phones because they don't want to be
out of touch. They subscribe to digital satellite because it gives them a better
selection of programs and movies at home. But these discretionary purchases
are tremendously sensitive to widespread uncertainty about the economy and
financial markets. Those worried about job security or the size of their nest egg
are less likely to buy a new big-screen TV or a smaller cell phone.
"HARD TO RATIONALIZE." Furthermore, there's a growing consumer
understanding that Moore's Law means a computer bought one year ago will
indeed be worth less than half as much a year later -- but will work just as well
with most existing software and hardware. Anthony Rossello, a 30-year-old
software engineer in New York, says he's more savvy about upgrading these
days because "outdated" is a relative term. He's still using a PC he bought back
in 1996. Granted, it was way ahead of its time then: The machine has a
Pentium II, 200-MHz chip, and 72 MB of RAM. "As a consumer, [Moore's
Law] is really annoying," Rossello says. "Buying hardware for a few thousand
dollars knowing that it will be updated within three years is hard to rationalize."
Finally, economists blame the tech-buying slowdown on larger macroeconomic
trends. Consumers have been purchasing new gadgets at a faster pace than is
consistent with underlying income and demographic trends, explains Mark
Zandi, chief economist at Economy.com. "For the past 10 years, consumers
have bought everything they can get their hands on -- new homes, new PCs,
new cars, Palm Pilots, phones. Now the demand is satiated," he says.
Despite the bad news, even the most bearish industry-watchers are optimistic
that when the economic outlook brightens, corporate and consumer demand
will rebound. What will be the next "killer" application?
New wireless data services, for one. Although the current raft of data services
have been a bust, tech analysts say the next generation will be better tailored to
consumer devices. Instead of being able to read a Web page on your phone,
you'll instantly access road conditions, directions, and local services on a
handheld.
Digital photography could be another huge growth area, since it eliminates the
need to buy film or pay for development. "Digital photography offers the
prospect of high quality for less money. That's what technology is supposed to
do," Saffo says.
SEEKING SYNCHRONICITY. Finally, there's improved connectivity for the
gadgets we already have. Rather than keeping phone numbers in your cell
phone, your PDA, and your PC address book, new wireless technologies,
such as BlueTooth, will allow gadget owners to sync all their information and
access it from wherever they are. "What we need is more and better
connectivity. People won't purchase hardware -- they'll buy bandwidth," says
Bruce Kasrel of Forrester Research.
Lisette Fernandez is all ears. "I'm looking forward to a time when everything
works together better. When it does, I would absolutely update my stuff," she
says. Technology companies are hoping lots of Fernandezes are out there to
help pull them out of their current malaise. The problem is, the necessary lures
might not be ready for a year or more -- a long time for an industry used to
breakneck growth and blind faith from consumer and corporate customers
alike. |
