Ringing the death knell on tech's high-growth era
Steve Lohr NYT
Monday, May 5, 2003
Martin Pichinson is one of Silicon Valley's undertakers. His
company, Sherwood Partners, has carved out a prosperous niche
as an expert in shutting down failed technology start-ups - 150 in
the past two years, and Pichinson figures that thousands more are
destined to fold.
"We're doctors of reality," he said.
The winnowing of the corporate population is just one sign that the
information technology industry is maturing in ways that will affect
technology companies, their customers and investors for years to
come. But what is painful for Silicon Valley is beneficial for those
who use the stuff it produces.
The industry, according to Irving Wladawsky-Berger, a strategy
executive at International Business Machines Corp., has entered
"the post-technology era." It is not that technology itself no longer
matters, he said; but steady advances in chips, disk storage and
software mean that the focus is no longer on the technology itself -
with its arcane language of processing speeds and gigabytes - but
on what people and companies can do with it.
As a result, industry executives and analysts say, the balance of
power is shifting away from technology suppliers and toward their
corporate customers. At the same time, the use of lower-cost
building blocks of computer hardware and software is spreading,
making it easier for companies and individuals to share data and
work together using industry standards rather than remain
dependent on one or two key suppliers.
These trends, they say, point to increased pressure on prices and
profits for most technology companies, a good deal for corporate
customers and a very tricky time for investors.
This is more than a backlash against the bubble years, a mere
pendulum swing in attitudes and practices. The technology itself
will still deliver waves of innovation in the future, but the industry
that has risen to account for 10 percent of the economy and nearly
60 percent of business capital spending can no longer play by its
own rules.
"I don't see a loss of faith in technology, but gravity has been
turned back on," said Dick Lampman, the director of research
laboratories at Hewlett-Packard Co.
Yet an article published last week in The Harvard Business
Review does question corporate America's faith in the value of
technology.
Titled "IT Doesn't Matter," it argues that information technology is
inevitably headed in the same direction as the railroads, the
telegraph, electricity and the internal combustion engine. All of
these industrial technologies aged from their boom-time youth to
become, in economic terms, ordinary factors of production, or
"commodity inputs," the article said.
"From a strategic standpoint, they became invisible; they no longer
mattered," wrote Nicholas Carr, editor at large. "That is exactly
what is happening to information technology today."
Most corporate executives say there is a lot they can do now with
technology to give themselves an edge. Glen Salow, chief
information officer of American Express Co., sees the recent
trends in the industry as working to his advantage.
First, he said, the hard times in the technology business have
increasingly meant that big corporate customers hold the upper
hand in their dealings with suppliers. That shift, Salow said, has
given him not only more bargaining power on price but also more
influence in the development of products and services.
With their new power, customers are also pressing for greater
flexibility in how they buy computing resources, including paying
only for as much product as they use, as if they were buying
electricity.
The widespread use of software standards, Salow said, enables
the thousands of internal programmers at American Express to
build applications almost as if snapping together Lego blocks,
reducing the amount of code that has to be written by hand. A
result, he said, is that the software for, say, a new credit card
offering or a fraud-detection feature can be built and put in use in
about two weeks; five years ago, this might have taken six months.
"It all frees you up to take more gambles because each risk is not
so costly and you can move a lot faster," Salow said.
The push toward utility computing, according to
Wladawsky-Berger of IBM, fits neatly into his concept of a
post-technology era.
"In the last few years," he said, "the underlying components have
become so powerful, reliable and inexpensive that you don't have
to worry so much about the underlying engine, and you can move
up to higher-level concerns."
IBM has moved more and more toward becoming a provider not
only of technology but also of business expertise in 17 industries
from banking to electronics and transportation.
Each successive wave of computing - from mainframes to
minicomputers to personal computers to the Internet - has opened
the door to new users and created new problems. Each of those,
in turn, must be addressed if the industry is to move ahead. The
Internet brought an explosion of computing complexity. And while
many dot-coms are gone, Internet technology has spread, is used
by most people and has become mainstream within corporations.
Marc Andreessen, a co-founder of Netscape Communications,
whose software introduced Web browsing to millions and touched
off the Internet boom, is now chairman of Opsware, whose
data-center software is intended to tackle the complexity crisis.
"At Netscape, we were building all the software components that
made this possible and created the problem, and we didn't grasp
the implications," he said.
Larry Ellison, the chairman of Oracle Corp., has been one of the
most vocal proponents of the view that the technology industry is
graying. "Thousands of companies are on life support that just
have to die," he said. "Our industry is in the inevitable process of
maturing."
But Ellison's concept of a maturing industry is not exactly a listless
old age. There will be fewer companies and slower growth, he
said, but still plenty of leeway for entrepreneurial creativity.
"There will continue to be very cool new computing technologies,"
Ellison said. Unlike many industrial technologies the
stored-program computer is a general-purpose tool, animated by
software, a medium without material constraints. The unrelenting
pace of improvement in processing speeds, data storage and
miniaturization means the tools get more powerful and smaller, and
then people find things to do with them.
And innovation is continuing apace despite the downturn.
Advances are evident in a range of technologies: wireless, data
center automation, speech recognition, intelligent software,
sensors, natural language processing and on and on.
Jim Gray, a computer scientist, has worked in the industry for
more than 30 years. His research on databases and transaction
processing at IBM and elsewhere won Gray the 1999 A.M.
Turing Award, sometimes called the Nobel prize of computer
science. "I've seen the 'end' at least twice in my career - only to be
surprised by the next wave," Gray observed. "My guess is that this
computer thing has just gotten started."
iht.com |
