» Archive for January, 2002

Jonathan’s Outlook for 2002

Tuesday, January 8th, 2002 by Jonathan Spira

2002 will be a banner year, primarily because it puts 2001 behind; a collective sigh of relief is heard throughout the IT industry.  But while the economy is not yet on a firm footing and many businesses are hemorrhaging, there are a number of reasons for me to be optimistic about 2002.  For starters, 2002 is the first palindromic year in over a decade, and will be the last for over a century.  But of far greater importance, there will be a great shift to practical tangible products in the IT world as several significant technologies which have been in gestation for years mature and blossom.

Technology magazines and IT pundits have been hyping convergence over the past few years, telling us that this is the next big thing.  Convergence literally means a “coming together.”  Unfortunately, 2001 saw some of the wrong pieces come together.

We (and perhaps the people making convergence devices) were never quite certain what convergence really was supposed to be.  For example, although perfectly logical in theory, computer manufacturers found out the hard way that their customers didn’t want to surf the Net on their TV, or make phone calls from their PC.  (N.B. Some forms of convergence, such as watching a DVD on a laptop, do make sense; with my laptop’s 15″ screen, I am the envy of all aboard entire 777s during many trips.  And more recently, various companies have started a mini-industry facilitating the delivery of Internet content to home hi-fi equipment.)

Now, convergence means that technologies are coming together to give users the power to access information and communicate, from wherever the user might be, with whatever form of device the user might have: instant information.  Only in the past 18 months have handheld computers become capable of rivaling their larger laptop brethren as a desktop replacement.  However, as small and light as these devices may have become, the actual interface to the device, i.e. fingers and hands, have remained the same.  Perhaps typing is no longer the best interface to obtain instant information?  Speech recognition is poised to go mainstream – and, in fact, is used by many who would never consider themselves computer users, as many airlines and financial services companies have implemented such systems over the past year.  But pocket-sized devices – sans pocket-sized fingers – may be the technology that raises speech recognition out of semi-obscurity into everyday usage in 2002.

Another technology that should explode in 2002 is home networking, especially of the wireless Ethernet persuasion [e.g. WiFi, which is based on the Institute of Electrical and Electronics Engineers (IEEE) standard 802.11b].  Prices for WiFi cards have tumbled in recent months and more laptop users are roaming the globe with wireless networking cards.  Around the world, community-minded folks are setting up shared WiFi networks.  In Seattle, two nodes near bus stops allow residents to connect.  A full-scale implementation would be a city-wide network giving users high-speed (and free) Net connections virtually anywhere.  What’s significant about these networks is that anyone with broadband access can set one up (although many broadband agreements do prohibit retransmission).

Mobility is not just limited to voice anymore, and wireless companies such as AT&T, Cingular, Spring, Verizon and VoiceStream are setting up 2.5G General Packet Radio Service (GPRS) networks which offer data services at 40 to 60 kbps in major metropolitan areas.  This pervasiveness of this service will also impact speech recognition; just ask anyone who has tried to type out a decent-sized word on a telephone keypad.  Of course, GPRS is not limited to mobiles, and Bluetooth, the short-range wireless technology, will soon begin to seize market share through its strength is as a cable elimination system (e.g. between the laptop and the mobile), the very reason why it was developed.  Just recently I started using a Bluetooth headset for my mobile, and can attest to the many benefits of being untethered whilst phoning.

This trend for mobility and wireless bodes well for a strong surge in broadband connectivity to the home.  After all, what good is a wireless home network without high-speed connectivity.  The failure of Excite@Home may have a silver lining; hopefully cable companies will give up on the idea of outsourcing this critical service and learn to run their own data networks.  (Notably, during the Excite@Home debacle, little if any mention was made of the DSL provider failures earlier in the year.)  But as the thirst for instant information, anywhere, anytime continues, users will expect always-on, high-speed connectivity both at the office as well as at home. (Eventually this will be de rigeur in cars and aeroplanes but the telematics needs a bit more time to get its act together.)  It was only a few years ago when home PCs were more fully featured than those in the office (with speakers, CD ROM drives, multimedia capabilities) and users began to demand the capabilities of the home machines at work.  Now users demand office speed connectivity in the living room.

Given all this progress, most users are still stuck in a mode requiring them to operate in a manner directed largely by the computer.  Rather than ask a question, one must perform a search and get results, which may or may not provide the answer.  When surveyed, 99 out of 100 human beings indicate “an answer” as the preferred reply to a question.  2001 did not bring with it a HAL or anything resembling the computing environment Arthur C. Clarke foresaw in his novel or the Stanley Kubrick film released in 1968.  However, given the progress artificial intelligence has made in the past few years, we see 2002 as being seminal in the deployment of natural language query systems which allow human beings to ask computers questions and actually get answers.

Of course, one huge obstacle stands in the way of  achieving nirvana: the two great network achievements of the past century, the telephone and the Internet, need to develop a common means of communicating so that Web information can be easily served up to a telephone set and Web pages can handle voice.  A standards battle is looming between the World Wide Web Consortium (VoiceXML 2.0) and a rival standard called Speech Application Language Tags, or SALT, developed separately by six members of the consortium, including Microsoft, Intel, and Philips.  This bodes well for progress here, as such controversy is likely to stimulate more work and research in the area.

We know that each transformational innovation came with a dozen detours and dead-ends.  This is part of the IT world’s Darwin principle, because only a high level of innovation and experimentation can keep the industry moving forward.  Many new products are announced every morning; some never see the light of day and most disappear from shelves quickly.  But the few which succeed will change the way we conduct business and interact -  and the way we live.

Jonathan B. Spira is the chief analyst and CEO at Basex.

The Failure of Reality

Tuesday, January 1st, 2002 by Jonathan Spira

Exactly one year ago, I commented on the year 2000 as one of great upheaval.  Little did I know what was in store for 2001.  No sooner did we recover from pregnant chads and the dot-com bust, than did major economic powers, among them Germany, Japan and the United States, fall into recession.  Stock markets sedately declined until September 11, which triggered a sharp drop, in turn triggering lower interest rates which, fueled by cheap oil, brought on a rally as hopes of recovery loomed.

Given the downturn, many expected online commerce to suffer a similar fate, but sales at outlets as diverse as Kmart’s BlueLight.com and L. L. Bean were substantially up.  And with fewer free shipping offers as compared with last year’s holiday season, e-tailers actually stand a chance of being profitable as well.

While profit-making ventures gained, free services, such as Napster, did not fare as well.  In July, a U.S. federal judge ordered the music-sharing service to remain closed (it had earlier stopped operations voluntarily) until it could demonstrate that it could effectively filter out copyrighted material.  Vivendi increased its world exposure through acquisitions including MP3.com, EMusic.com, Houghton Mifflin, while teaming with Yahoo and Sony on other fronts.

In other industries, the impact of September 11 amplified economic woes, most notably the airline business, where large carriers, already bleeding red, slashed staff and cut capacity by ca. 20% system-wide.  Notably, no-frills carriers such as Southwest and easyJet flourished in this environment.  Online ticket sales and e-ticketing increased in popularity, even as Delta’s Web site famously tried charging a customer US$21,469,423.27 for a return flight to Germany.

General Electric and Honeywell managers are still shaking their heads:  European regulators said “non” to their planned merger, already approved in the U.S.  Hewlett-Packard and Compaq announced plans to merge, but prospects for the successful completion of the merger are not promising, as HP chief executive Carly Fiorina failed to observe such social niceties as making certain her major shareholders, notably the Hewlett and Packard families, were in her camp.

Enron, which reshaped the markets in which natural gas and electricity are bought and sold, filed the largest corporate bankruptcy in U.S. history and blamed the company which had presented itself as its rescuer, Dynegy.  In 2000, Enron was one of the nation’s largest companies as measured by gross revenues; given the complexity of its operations and financing, which included leading global financial institutions, its wind-down will be dramatic, but hopefully not sour the momentum that it started for open interposits, a form of B2B exchange.

Microsoft: appealed Judge Thomas Penfield Jackson’s judgment to split the company in two for having been an illegal monopolist; a U.S. appeals court upheld Judge Jackson’s finding but rejected the concept of the break-up.  In an attempt to expedite matters, many states attorneys general and the U.S. Department of Justice agreed on a settlement, but nine U.S. states are still refusing to go along.  One key issue in the case has been Microsoft’s handling of its dominant Windows operating system, including the bundling of browsers and other add-on products.  In autumn, Microsoft practically self-impaled itself when it launched Windows XP, which has tighter browser integration, replete with a security hole that the company itself termed as “critical.”

Gerald Levin resigned as chief executive of AOL Time Warner.  His successor will be Richard Parsons, the company’s co-chief operating officer.  Prior to the merger, Parsons was the number two at Time Warner, while Robert Pittman, now co-chief operating officer with Parsons, was the number two at AOL, reporting to Steve Case.  Pittman will become the company’s sole COO.  The succession is notable in that, at the time of the merger announcement, Pittman was widely expected to remain the heir apparent, but the ebbing fortunes of the Internet side of the business, compared with relative strengths of the more traditional business lines, occasioned a shift in the balance of power.

The appeal of cable company-provided broadband took a big hit in November as users of Excite@Home, whose auditors had already expressed “substantial doubt” in August that the company could continue operations, started to see their service eviscerating before their very eyes.  Several million subscribers were impacted, some losing service – and access to e-mail – for upwards of several days.  Although DSL installations are predicted to outnumber cable modem hookups worldwide, cable was expected to outdistance DSL in the North American market until certain of the cable modem providers proved themselves to be unreliable.

It was an interesting year, to say the very least, and one full of surprise.  It is difficult to imagine a climate in which news of a major jetliner crash would be greeted with relief that it was merely an accident, yet such is the thinking nowadays.  Many believe the world changed on September 11, 2001.  I would be the first to disagree.  The dangers were always present; we were simply made aware of them on that date.

Now we may overreact; we have security “procedures” in place, yet these very measures secure very little while producing great anxiety to many.  Mail (of the snail variety) may be contaminated with Anthrax; e-mail may contain viruses.  If anything, information technology has more prominence than ever, since online meetings, such as the Massively Parallel Conference variety we identified earlier this year, may make some travel unnecessary.  Traditional business thinking, combined with genuine innovation, is winning out over new media fads which turned fickle.  Let’s hope this is a trend that stays.

Finally, given the tumultuous state of world markets, how is the new millennium faring?  Other than those who predicted that the world would end on 01.01.01, the thirst for the new century was so great that many celebrated the dawn of the new millennium one year early.  Today, many might have wished that the previous millennium had been extended for a while.

Jonathan B. Spira is the CEO and Chief Analyst at Basex.