Back to Business
Posted on September 2, 2008
Filed Under Uncategorized |
Summer is over… I took my son to first day of school today and the hustle and bustle of not only school but also traffic reminded me that the long slow month of August is history. I was out on vacation last week but today is back to business.
While I have been writing more about public policy and non-tech items I find interesting these last few months, I have not be totally ignoring the tech world either; I simply found little exciting or interesting in tech these last few months.
This is not surprising and indeed it fits with a consistent pattern of 5′ish years of innovation followed by 3′ish years of digestion. So what does that historical pattern suggest about our immediate future? Probably nothing more than what we are seeing right now, which is less enthusiasm for the new “new” and much more attention being paid to making work what we already have.
With that in mind, what are the big challenges that are facing the tech world? Here’s my list, which I will reserve the right to modify after more thought on the subject:
- Economic uncertainty: Clearly this is a factor with tech being no less insulated than any other business sector. Across the board people are impacted by energy costs, consumer products inflation, food prices, and job market uncertainty, strongly so for unskilled labor and students. All of these factors conspire to constrict the flow of capital for business creation, as well as restrict corporate budgets for projects deemed more speculative than predictable.
- Advertising market chaos: The low value being attached to online advertising and social network campaigns is going to remain a key issue for companies relying on advertising for their business model.
- Enterprise plaque: Despite the inroads that SaaS companies have made into enterprise accounts, the fact remains that the entrenchment that the MISO (Microsoft/IBM/SAP/Oracle) has means there is little structural change in that market. The poor marketplace performance of SAP’s BBD demonstrates that traditional enterprise companies can’t easily straddle a market with two business models that feature different economics, delivery, support, and sales processes. This reality will dissuade other companies from attempting this hat trick, and because few companies will take the tough steps to remake themselves beyond the imagery of a SaaS business, well it’s more of the same on premise world we have been living in.
- SaaS economics: Speaking of SaaS, the economics of that business model is increasingly coming under scrutiny. Salesforce’s stock has been in a tailspin since last week amid concerns about slowing growth, but that’s only half of the issue. The simple fact of the matter is that CRM not only is experiencing a slowdown in growth, they also aren’t making a lot of money… the irony is that Salesforce is having a great year from a revenue standpoint, their revenue per employee is a right up their with SAP but the other side of that coin is that their net income per employee is pretty grim. I’m not singling out Salesforce for criticism, but they are a good proxy for the overall health of the SaaS market and right now it’s looking a lot more like the telecom market with high churn rates and and corresponding sales and marketing expenses that take a big bit out of the bottom line.
- New markets: BRIC (Brazil, Russia, India, China) have been collectively the gleam in the eye of many software executives for the last 15 years. The reality is that each market has it’s own challenges to success but in general it’s a tough nut to crack and a very expensive strategy. The irony is that two enormous markets in terms of spend often get ignored even though the prospects for success are much more predictable, I am referring to Japan and the EU.
- Grab bag: Distribution challenges for consumer applications remain, even with Facebook… carriers still have way too much control over mobile platforms, despite the inroads the iPhone has made… broadband penetration is good but speeds are way too low… regulatory policy at the federal and state levels isn’t disruptive to the status quo and intellectual property law badly needs a makeover.
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About
My name is Jeff Nolan and I write Venture Chronicles. These are my thoughts on technology, innovation, management, public policy and pretty much anything else that I find interesting.
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