Here is a first for me, I am going to agree with something that Stephen Roach says.
First, the entire statistical argument is crud. He includes telecom in his business capital number. The telecom vertical was the largest buyer of technology during the '95 - '00 period. It is a hardware intensive business. If the largest niche for an industry cuts back on buying products it is not a surprise that the drop in the type of products it buys is larger.
However, he has a point at end. From my study of technology bubbles I have noticed that after the crash there is a notable change in the industry. The emphasis shifts for technological invention and infrastructure to business innovation. The gating factor in this process is social not technological. Our social, political and economic practices are still aligned with the previous era (mass production in our case). This leads to a lag in the ability of the economy to absorb the new technologies effectively.
The current war over Intellectual Property rights is a great example. The laws and regulations governing IP are all designed for the mass production era. These laws impede the development of new applications of IP appropriate to the connected era. The politician intervene 'to protect' the existing industry because they are the ones with the money. The same thing happened when the telephone emerged. New regulations, to protect the telegraph business, made it difficult to get long distance calling built-out.
There is a period of time when the new technology and existing social practices mutually transform. However, to the end users of technology it looks like the technology doesn't deliver.
I think this is exactly where we are today. The value proposition of internet-enabled technology is not sufficient to warrant big capital-intensive projects. The bettor vendors will recognize this and work to better integrate into the 'social' aspects of their customers (ie. dont expect salespeople to fill out CRM forms and many, many others).
Yes, we’re getting there. But for all the hyper-speed of the Information Age, the progress is coming at a snail’s pace. And it’s progress with a fully loaded cost bill that blows the mind -- to say nothing of the profit margins of a vast corporate user community.
So, this statement is true as far as it goes. However, he fails to understand the basic economics and competition will drive vendors to work to design applictions that will be economically valid.
He also underestimates how fast that can happen and how suddenly a technology market can experience explosive growth.
File it all under, "It was a bubble, get over it Roach". This too shall pass.
Paul |
