The Wave Front
Technology Trends - A Five Year Perspective
by The Outlook Team
Current forecasts regarding the future of software are not nearly as bright as they were last quarter. Most viewpoints focus on the relatively limited impact software has had on business in the last three to four years. However, at Outlook Ventures we subscribe to a broader and more positive viewpoint.
Technology has always been a cyclical industry and today's software sector is no exception. We believe that there are a number of predictable trends shaping the software industry that will revolutionize the direction of software and create tremendous business opportunities.
The Outlook Ventures viewpoint represents our perspective on factors affecting the direction of the software industry and views as to what opportunities are available in the next three to five years.
The Present Corporate Environment and Business Needs
Having undergone tremendous destabilization from the prolonged downturn, enterprises today are experiencing a return to business fundamentals-- creating a well-managed, efficient and reliable enterprise.
Senior management's concerns are not limited to external global economics and geo-political factors but also to the resurgence of corporate requirements for greater accountability and ethical conduct. A CEO's big picture in the 2003 strategic agenda combines the need to discover business models that yield optimum products and services with the best economies of scale; while at the same time wrestling with pressures to cut costs, conserve cash, boost service and increase profitability. CEOs must also lead their companies to implement structural changes in response to increased competitive pressures in a time when people are insecure and loyalty is tested.
While the corporation faces increased demands for new capabilities it is reticent to increase spending. A prime example of this paradox is the Information Technology organization. Corporate IT spending has declined over 20% from its peak forcing companies to prioritize and focus on a small number of technologies and solutions that can address heightened business needs.
Gone are the days of "spending for growth" justified solely by the promise of profitability in the distant future. Acute focus on cost control, both in terms of new spending and leveraging existing investments has become as important as top-line growth. New projects being undertaken have to demonstrate clear return on investment in the short run. For this reason, there has been a shift in focus of IT spending from long-term infrastructure and experimentation with the latest technologies to better leveraging previous investments, such as ERP and CRM systems.
To align with corporate efforts pursuing manageability, efficiency and reliability, Information Technology now focuses less on procuring or building large new systems and more on integrating existing systems and extending their utility. Repeated disappointments in not realizing value from past investments has led enterprises to insist that new technology purchases help them gain tangible competitive advantage -- to squeeze costs from the supply chain, to create lasting relationships with customers and to empower internal and external constituents with ubiquitous knowledge.
Technology Meta-Trends
The pace and direction of technology innovation is closely related to the technology environment and customer needs as shown in Exhibit 1. There are both evolutionary and revolutionary triggers to technological innovation. On the evolutionary front, customer needs drive internal R&D departments to either seek or develop new technical solutions to solve existing problems. At the same time, creative entrepreneurs with vision and a deep knowledge of market needs and technologies will continue to develop revolutionary offerings in their garages.
Exhibit 1
Innovation framework
The needs faced by today's corporations are spawning a new set of technology meta-trends that point us in the direction of future areas of software innovation.
Tech Trend 1: Ubiquitous information.
Today, information is the glue that holds most organizations together regardless of the industry. Information ultimately drives all business processes within and between enterprises. With technology deployed throughout every nook and cranny of the business, enterprises are faced with significant overload of information ranging from structured data, such as detailed sales results and inventory tracking, to the more prevalent unstructured information, such as contracts and employee knowledge. Managing terabytes of information and enabling any employee or partner to leverage it anytime and anywhere provides a powerful opportunity for companies to boost performance.
Technologies that contribute to collecting and harvesting ubiquitous information include:
An explosion of new wireless devices, applications and networking standards that allow capturing and analyzing data efficiently from remote locations.
Low cost identification tags and associated applications enabling intelligent management of physical assets such as inventory and property.
The proliferation of standards based data structures and information to drive inter-enterprise communications (e.g., XML).
Tech Trend 2: Real time.
Enterprise systems emerged as part of a batch-oriented world. Managers were satisfied getting weekly sales reports the following week despite sacrificing opportunities to affect the sales results.
But tomorrow's business leaders need their fingers on the pulse of the enterprise. Real-time information systems allow managers a level of visibility that enables more informed decisions and ability to quickly address competitive environments. In the near future, the ability of a corporation to capture, store and process information in real time will be the hallmark of its success.
Examples of real time systems include:
Real-time transaction systems that upon a sale being finalized, the invoice is generated, sales forecasts updated, inventory deducted and changes reported to financial statements. All this in real time, ensuring the entire enterprise is in synch with the state of the business.
Real-time project management allowing business managers to track projects, reallocate resources, identify schedule slips and identify the implications to the company.
Tech Trend 3: Pervasive intelligence.
Today's systems operate with "intelligence" generally limited to simple logic incorporating a fairly finite breadth of inputs. But the amount of data pouring into enterprises regarding customers, competitors and operations overwhelms most managers. Using systems-based intelligence to "tame" the data overload will be a way for organizations to lower costs, improve timeliness and consistently implement optimal actions.
Emerging pervasive intelligence systems include:
Intelligent, advanced networks and systems incorporating capabilities allowing the network to self-configure, self-optimize, self-heal and self-protect. Such intelligence will reduce the total cost of ownership drastically while boosting its reliability.
Business activity monitoring systems tracking the changes occurring throughout the enterprise to produce alerts and recommended actions, improving the speed and efficiency of an enterprise's business operations.
Inventory management systems able to track the specific locations of each product across a global supply chain while producing constantly updated demand forecasts to ensure adequate supply, thereby lowering inventory costs and improving customer service.
Tech Trend 4: Cross-enterprise collaboration.
Over the past twenty years enterprise technology has focused primarily on automating functional silos within the enterprise and has slowly moved to integrate functions across related enterprises. However, as critical elements of a business become outsourced to partners and optimization of the supply chain requires coordination with customers and vendors, cross-enterprise collaboration becomes a requirement.
Cross-enterprise collaboration has been handicapped by the effort required to exchange data, utilize common applications and communicate. But emerging technologies are moving to overcome these obstacles:
Expanded standards usage, such as XML, will enable enterprises to readily share data with partners and incorporate shared data directly into existing systems.
Componentization, such as through web services, will facilitate partners creating composite applications that coordinate their respective businesses without either partner sacrificing control or flexibility that a monolithic application imposed on partners would require.
Business partners require varying means of communication to suit the task and relationship. Expanding adoption of communication technologies, such as instant messaging and web conferencing, ease the challenge of collaboration.
Tech Trend 5: Holistic security.
With the trend toward a real-time, connected enterprise security will become more holistic and encompass all systems and sub-components. Security must take into account the individual (such as identity checking), the network (such as application and virus protection) and the overall enterprise (such as business continuity planning). As systems are extended cross-enterprise the challenges of enabling partners while ensuring security increase significantly.
Holistic security systems will need to leverage individual security components, embrace all critical elements of the enterprise and extend to the business partners:
With security breaches becoming more intelligent, security components can no longer act autonomously. Tomorrow's holistic security systems will leverage the analysis from numerous security sources to understand the nature of the threat and be able to control all aspects of the environment in order to respond the threat.
While much effort has been placed on securing the IT components, business continuity requires incorporating all critical elements of the enterprise, such as electrical and environmental systems, into a comprehensive monitoring and management system.
In providing partners with access to the enterprise's data and applications, companies will introduce more sophisticated security mechanisms that do not create a barrier to business processes.
Overall, this appears to be an ideal time to investigate business opportunities around technologies that may have been too early to market just a few years back. While there have been investments that were clearly visionary in nature, such investments clearly served the purpose of highlighting the capabilities that can be harnessed through technical innovations. These times, when assets and resources are cheaper than ever before, might provide the economic base required to start a business with the aim of full-scale commercialization in a few years when economic growth is expected to be stronger and demand for software solutions is expected to be significantly higher.
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