It used to be a lot easier. Predicting the future, that is. Being an industry guru was a fun job. The Wall Street Journal or The New York Times would quote you, your mother could brag to the relatives and you could sit on lots of panels in technical meetings. You said things, and everyone nodded and actually wrote down what you said. Paid well, no heavy lifting.
In the old days, all you had to do was understand the dominant company in the sector, such as IBM Corp. or AT&T Corp. If you knew where the gorilla company’s development was going and where they were avoiding spending, you could predict where and how future technologies would fall.
Then it started to get harder to be a respected guru. More innovation was coming from outside the major companies, so to be ahead of the curve you had to suck up to the academics. Places like MIT, Harvard and Stanford led the way. These universities were the first to deploy routers and embrace Unix. The academics had lots of brains but not a lot of money – unless that money was coming from the government.
But if you were alert, you could still figure out the next movement and maintain your guru credentials. All you had to do was carefully watch when the investment banks started to deploy new technologies. These bankers were another group with lots of smarts – and an unlimited budget. And you wouldn’t have to watch the whole organization, just the most demanding internal users, such as the traders at Merrill Lynch & Co. Inc. or the arbitrageurs at Bear, Stearns & Co. Inc. These power users and subgroups could have anything they wanted, so they were the first to embrace workstations and networks, and do neat things with databases and storage.
By 1990, predicting the future started to get harder. Enter the venture capitalists. In 1996, new venture investments were US$6 billion. Last year they were US$104 billion. The venture industry had replaced the U.S. government as the largest supplier of research and development dollars. Most of this money was originally aimed at the enterprise market, but increasingly by 1997 it was honed toward the carriers – so we were shoveling money in optical networking and Gigabit Ethernet. Many of the advances in corporations were just dummied-down versions of what the carriers had been deploying. T-l, inverse muxes, call centres – all were technologies that first started as products for carriers.
But now the spending binge is over. The carriers have cut back their spending 15 per cent this year over last, and next year we expect them to cut back another 15 per cent. The carrier’s debt has gone from US$235 billion to US$700 billion in just three years. All those technology companies making a “god” switch they hoped to sell to all the CLECs and LECs have found the carrier doors closed. We have too many metro optical companies and technical standards, and too few buyers. We have Bluetooth, Wireless Application Protocol, 2.5G, 3G, 802.11 and 802.16. Sometimes I think the entire standards movement is a thinly disguised front for getting more people to fly Swissair.
So if the carrier market is closed for a while, then the gurus will go back to the enterprise companies. Or maybe not. Pity the poor enterprise user. It is no longer possible to make decisions based on best of breed, which used to be one of the key criteria. Why not? Because the best-of-breed firm may not get funded, so if you choose them they just may not be around next year, causing your boss to look at you slant-eyed and question your competence.
Suddenly, being a guru just isn’t as much fun. People are starting to keep track of your predictions, and the old methodology just isn’t working. The government is no longer the serious funder of academic communications and computing it once was. The academic community isn’t sending a clear signal as to its direction. There no longer is a single dominant company in technology. And now the market researchers are having difficulty predicting what the future will look like because they have no idea where the fickle venture capitalists will be investing next year.
Like I said, it used to be a lot easier. If you don’t know where you’re going, then any road will take you there.
Anderson is senior managing director of Yankeetek Ventures, a Cambridge, Mass., early stage venture capital firm. He is also founder of The Yankee Group and the William Porter Distinguished Lecturer at the Massachusetts Institute of Technology. He can be reached at handerson@yankeetek.com.
