The Pessimists Are Correct About The Future of High-Tech, But Only For Now

Every single one of those statements is true,for now.

At some point, they will all be false. What all of these statements fail to take into account is that we are in a stalled market right now for a slew of sound reasons, all of which at some point will be overcome.

The current recession came about because businesses pulled back on spending. That's unusual because it is generally a decline in consumer spending that sends the economy into the doldrums. We are also still burning off the crazy spending levels spawned by the Internet bubble. But bubbles are not generally part of an economic cycle, and when we exit this recession we are unlikely to experience another one.

The pessimists are not taking into account the fundamental high-tech phenomenon that groundbreaking technology spawns enormous investment and a huge influx of new companies that expand that technology.

The PC is an excellent example. Apple Computer launched the desktop category. IBM's entrance with a PC built with off-the-shelf components sparked the entrance of hundreds of PC manufacturers. Names like CompuAdd, KayPro, Vector Graphic and dozens of others that no longer exist came into the market.

We saw a similar influx during the dot-com craze. In both eras, many entrants failed. But in both cases, the introduction of a new technology sparked an influx of new entrepreneurs.

The problem we currently face is that there is no new technical advance driving innovation. But at some point there will be.

Where it will come from, no one knows. But I can tell you where it is unlikely to come from,Microsoft. There is little chance that Microsoft will be the real innovator of the future, because the developer is not likely to risk upsetting its current money-printing machine.

It's also unlikely that IBM, Hewlett-Packard or any other big high-tech brand will drive innovation, for that matter.

Meanwhile, we will plod along in a market that looks much like other commodity markets. In order for vendors to gain market share today, they must act more like Coca-Cola and other giant consumer-brand experts. The way to gain share right now is to concentrate on marketing and sales.

There are very few companies that are executing well in marketing and sales efforts. IBM is a good example. In my opinion, IBM's channel programs and direction are very solid. But the solution providers I've talked to haven't a clue as to where IBM is headed in either product or channel strategies. And if you don't know where your supplier is going, you tend to look for alternatives.

So, as we sit and wait for a technical advance capable of driving huge entrepreneurial investment, market share gains will largely come through channel sales forces and the decisions of solution providers to push one supplier over another.

The good news is: Somewhere, right now, a visionary is working on something truly innovative in a small office or a garage. Once introduced, the innovation will drive dramatic investment and deployment of new technology, much like the original IBM PC. Or the Netscape browser. Or the minicomputer.

We don't know when or from where it will come. But when it does, we will see hyper-growth, and all the statements at the beginning of this column will be false, once again.

Make something happen. I can be reached at (516) 562-7812 or via e-mail at rfaletra @cmp.com.