Has tech finally turned the corner?

Posted by Peter Cochrane on October 1, 2003

RethinkingGroup.com, Rowan Gibson - October 2003

Call me an optimist, but I'm starting to get good feelings about 2004. And I don't think I'm alone. Seems like things are pointing in the right direction again for the first time in years.

My tip: watch the technology industry. In economic terms, it's the canary in the coal mine. If the tech industry keels over, it's a dead certainty (no pun intended) that the global economy will follow, just as it has over the last three years. But when the nerds wake from their coma and start singing again, it's a sure sign that economic recovery is on the way.

The good news is that, throughout the technology sector, financial results appear to be on the upwards trend. From Microsoft to EDS to Computer Associates to Texas Instruments to Seagate, right through to Amazon.com, where revenues grew 33 per cent last quarter and the company posted a much yearned-for profit. Amazon's CEO Jeff Bezos, the ultimate icon of technology optimism, tells us he's especially looking forward to Christmas this year. Not because he particularly likes sleigh bells and mistletoe, but because it looks like this will be Amazon's biggest quarter ever.

Then there are the technology columnists (sort of the canary's canaries) - including my buddies Kevin Maney over at USA Today, and Peter Cochrane at Silicon.com - who (thankfully) have a lot of exciting stuff to chirp about again. Like RFID (radio frequency identification) - the controversial new tracking tag technology that is essentially about Rethinking The Barcode. Cochrane believes that RFID is going to revolutionize global logistics. And Maney says the tiny tags are 'on course to become a profound part of everyday life,... more common than socks'. Soon we can expect RFID tags to become ubiquitous, attached to every Gillette razorblade, every Nike running shoe and every can of Coke.

Talking of ubiquitous: it's also great to hear that everyone's favorite search engine, Google, is planning an IPO - an event so significant that many put it on a par with Netscape's public offering in 1995. Google could float as early as March, and is expected to fetch around $15bn. This would send out a lot of positive vibes - signaling that the tech industry may have finally turned the corner - and likely prompting a series of subsequent flotations from this sector.

Things are starting to move and shake in other areas of the industry, too. At the ITU Telecom 2003 show in Geneva in October, Bill Gates announced that Microsoft has teamed up with Vodafone to bring together the worlds of IT and mobile telephony. The name of the game is mobile web services. And, according to industry analyst Gartner, it's an area that's going to be BIG.

Another positive sign is that corporate IT budgets are rising again. Gartner's forecast is that worldwide spending on technology will grow 5.4 per cent in 2004 to $2.4tn. This indicates that companies are at last shifting their focus from cost cutting to investing in innovative technologies that will help drive their revenue growth.

It's also encouraging to hear that online advertising revenues are booming, with internet advertising in Europe expected to achieve double-digit growth in 2004 and 2005, according to a study by consultants PriceWaterhouseCoopers (PWC) in collaboration with Zenith Optimedia, the central buying service for ad space. They attribute the revenue increase to the fact that more subscribers are now switching to broadband and that more users are actually responding to e-commerce promotions (instead of ignoring them), which makes the medium more appealing to advertisers.

So after three l-o-n-g years in the doldrums, a lot of people are starting to whisper that the tech industry may have finally made the 'big turn'. All of which bodes well for the global economy. As the needle on the technology barometer starts to move tentatively from 'wet and windy' towards 'fair weather', the rest of us can begin to hope that better days lie ahead for business in general.

And don't we need some good news? This economic downturn has seen the worst fall in corporate profits since 1940 - across all industries for S&P 500 companies. We've had the dotcom crash, September 11, Enron, Arthur Andersen, Worldcom... the list of woes goes on and on. And it feels like a rebound is long overdue.

Even if the global economy is poised to make a comeback, we feel perhaps like Robert de Niro's character in Analyze That who, when released prematurely from prison, turns to the therapist (played by Billy Crystal) who was instrumental in arranging his release, and the only thing he can manage to say is, "IT TOOK YOU LONG ENOUGH!"