03 Jan Year ahead offers payoff for hard work

First-of-year columns are ripe for prognostication — and this one is no different. Like a creaky car on an old wooden roller coaster, the technology industry has been laboring up, up, up the steep incline of recovery. After so much work, the year ahead will offer a bit of payback, a little joy ride. And to be clear in my metaphor, let’s be sure to picture a few playful loops, not the white-knuckled death plummet we have not yet forgotten.
The next 12 months hold promise and optimism, the dividend for the gut-wrenching cutting and scraping and scouring of the past four years.
For certain, we will see many hard-fought technologies go mainstream in 2005. For nearly 10 years, we’ve seen steady progress in voice over IP technologies, for example. This year, IP telephony becomes almost common, not just in enterprise telephony systems but also in consumer applications. By year’s end, Skype will become a verb, as in “I’ll Skype you at 9 tomorrow so that we can discuss the matter.”
Service-based computing will also hit a tipping point: Enterprises will find increasing benefits in a hybrid model that mixes in-house IT operations with outsourced application management, and small enterprises gain big-company advantages by tapping service-based solutions.
These are just two technology trends among dozens that will find the room to run in 2005. This is the payoff year for the investment in several technologies, from sensor networks to consumer digital media appliances.
But the real story over the next 12 months will be of the business climate, one that supports entrepreneurial development without over-inflating would-be markets.
Even in these early days of 2005, it is clear that venture capital is returning to the table. Tracking an improved investment climate of the past 12 months, 2005 is destined to be the biggest year for venture capital invested since the boom, and by a large margin. There is money to be put to work and there are great opportunities to make that work pay off. For the first time in my 9-year history with DEMO, more than half the companies that will take part in the February conference were funded by, as one company put it, “3F: founders, friends, and family.” Each of these companies brings its product to market through sheer bare-knuckle efforts. And each one, with the right capital and nurturing, is ready to grow.
These companies are attractive, not just because they have endured the development risk and are now ready to move to market, but also because the market is ready to absorb small companies that have developed great new ideas. Indeed, 2005 will see tremendous action in mergers and acquisitions for two reasons. Over the past four years, large technology companies have cut their capacity to innovate through research and development. These companies will acquire technologies to expand their portfolios and grow new revenue.
Second, many small start-ups have been investigating similar technologies. As market segments mature, we’ll see technologies consolidate, either as large companies acquiring missing pieces to their product strategies, or smaller companies banding together to compete on a larger scale. I’m keeping my eye on the anti-spam technology providers and security products companies as two areas ripe for rapid consolidation in the first half of 2005.
At the start of each year it is typical to send greetings wishing health, happiness and prosperity. For the first time in a few years, it feels right to extend that wish with a sense of optimism (and, dare I say it, certainty). May the coming year be a prosperous one for you.
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