IT update - Up up and away

The dotcom crash has had a greater impact on IT than is often understood.

Confidence in technology has been severely dented, and fundamental questions have been raised about the real value of innovation and the role of the IT department. One rarely hears talk about a bounce-back for IT any more.

Even the relentless obsession with the Next Big Thing has been eroded.

In many ways, the psychological correction is as necessary as the financial one if technology is to move to its next stage at the heart of any competitive business in global markets. But there are very strong reasons to begin considering how the next wave of IT is going to work. The most compelling is that a slow but sustained recovery is coming soon. That’s not wishful thinking but basic business common sense. We are reaching the point where equipment and systems become cheaper to replace than repair. To hurry along this replacement cycle, suppliers are currently offering bargain-basement deals.

Upgrading old systems is a far cry from the days when enthusiastic technology advocates were talking about shifting business paradigms and killing off the high street. IT departments are also likely to have little discretionary spend on promising ideas.

Necessity may well prove to be the mother of invention, however. Analyst firm Gartner has been urging its IT clients to keep their heads down during the downturn, cutting budgets and scrapping inefficient projects. They coined the phrase ‘The Gap Year’ to describe this depressing phase of consolidation and rationalisation – that was more than two years ago. Interestingly, Gartner is now singing a different tune.

Chief executive Michael Fleisher told delegates at the analyst’s Spring Symposium in Florence, Italy, “Today we find ourselves at a point of deep pessimism, but I think we’re getting lost in the emotions of the moment; succumbing to conventional wisdom and short-term thinking instead of using our experience and our knowledge to find a path forward,” he said. “The claims of internet-era entrepreneurs and investors were overblown and they collapsed with such abruptness that we seem frightened to dream any more about where all this marvellous technology can take us,” he said.

A cynic may say that analysts are waking up to the fact that the troops need rallying at the moment. IT departments don’t spend money on analysts any more than on fancy ebusiness projects. But Gartner has a coherent vision on which to base its predictions for the next wave of spending. Overcapacity has been worked out of the system after two years of rationalisation, cutbacks and consolidation, it argues. Having sliced away every ounce of flab from IT budgets, companies are in danger of cutting into flesh. Instead, directors should concentrate on one of the oldest business maxims – ‘time is money.’

Speed-to-market will be a vital factor in tougher global markets, says the analyst. It talks of the creation of an ‘enterprise nervous system’ around which revolve fast, agile systems driving out wasted time with the same vigour that the company has been tackling financial waste. The winning technologies will be those that can save minutes and seconds. IT will be chosen in a far more strategic way than during the ecommerce boom. We won’t go back to the years when business models were adapted to, rather than supported by, software. Real-time thinking will look at the issues that slow down production, distribution and sale.

One critical area is freedom from the tyranny of the office. The people who do the real work in any organisation need to be talking to customers with anytime, anywhere access to business information.

Liberation from physical ties such as cables is therefore vital. Wireless local area networks (WLans) are seeing serious investment and the main providers are virtually giving kit away, desperate to lock in a new generation of customer. “With most companies getting high, near-term ROI on wireless, and with key players almost giving it away, the end result is a sure market winner,” says Fleisher.

In the next three or four years, we will see more complex mobile telephones working on smarter, faster networks. The future 3G has been delayed and killer applications are yet to be clear, but the telcos will throw everything at the technology to recoup at least a proportion of horribly overpriced licence fees.

Escape from the office may go hand-in-hand with freedom from text, which is both time-consuming and excludes quite a large number of potential users and customers. Text-to-speech applications will find a place in the market if internet telephony overcomes technical and standards problems. Tying in all these technologies are two fundamental concerns – security and standards. Public Key Infrastructure, Virtual Private Networks, biometrics (such as fingerprinting and iris scanning) and identity services, are all about ensuring that access to systems are as safe as they are in the real world.

The key to making the real-time enterprise work will be web services – the collective name for a set of standards and services that allow systems and applications to talk to each other. Gartner’s predictions for adoption are open to question, but at least it is looking beyond the Next Big Thing.

And the pursuit of the real-time enterprise may prove valuable in itself. There are serious dangers in judging every piece of technology individually, particularly if using the blunt instrument of ROI. Time, and its value to the company, are eminently measurable and require thought about the medium and long term rather than the here and now.

Company IT decision makers may find it offers them a way to ditch the techie in favour of a new role at the leading edge of company strategy.

But questions about the quality of supply remain. How keen will the market be to accept software integrity and ecommerce security after years of false promises?

But the world is changing fast and systems and software suppliers have, on the whole, learned the dotcom lessons. A hard-headed buyers’ market will sort out those offering shoddy goods or whose products cannot be yoked to sound business plans.

The biggest issue is whether companies can see beyond the disappointments of the dotcom bubble and the period of Luddite depression that followed. A British Chamber of Commerce survey this month showed that the tide of negative thinking is beginning to abate.

Asked about contributing factors to improved productivity, 53% of companies said IT investment was most important. The pieces are surely in place for a substantial recovery.

WHAT THE ANALYSTS PREDICT
Gartner’s Hype Cycle model, developed in 1995, illustrates what the US analyst firm sees as the traditional development of technology, from overenthusiasm through a period of disillusionment, and, if the technology is successful, a period of growth. In most predictions (above), Gartner believes the current technology triggers, or ‘Next Big Thing’, in IT are nanotechnology and microfuel cells – both far from maturity and of limited significance for corporates.

Those technologies reaching maturity, like wireless networks and web services, are considered by many analysts to be major points of investment for businesses.

Aberdeen Group estimates that global IT spending will grow in 2003 by about 4%, up from less than 1% in 2002. Major investment areas cited by Aberdeen include open source software, with the implementation of Linux-based servers predicted to increase by 40% over the year.

Aberdeen also predicts that wireless networks will be the one bright spot for telecoms companies, with falling prices for wireless kit driving businesses to implement WiFi technology. This feeling is echoed by researcher IDC, which says the European hot-spot market (areas where mobile users can access the internet wirelessly) increased by 327% in 2002 and will continue to grow in 2003.

Tablet PCs, which teeter on the top of Gartner’s peak of expectation, are a bit of an unknown quantity. IDC estimates that over 70,000 tablets have been sold to date, but penetration in the corporate sector is low. IT departments are still testing the technology and it is yet to be seen whether tablets will plunge into the trough of disillusionment.

In general, IDC is rather bearish about the general outlook for the IT industry, predicting that the European market will only grow by 2% in 2003. “Overall, the Western European market remains inhibited by challenging business conditions and tight spending on technology,” it said in April 2003.

It seems likely that those technologies and markets with definite short-term ROI, such as wireless and outsourced services, will grow quickest during the year, although META Group expects web services to flourish, especially in ecommerce, where legacy systems are integrated easily.

British analyst house Ovum denies there is any killer technology in IT that will help grow the industry over the next few years.

Businesses, it says, should instead maximise the technology they already have rather than invest further in new systems. “Nothing should distract users from return on investment,” said Philip Carnelley, software research director at Ovum.

Ovum does, however, see growth in the utilisation of the internet, where applications can be made to run in a standard online environment, reducing the need for costly proprietary systems.