In 2003, the tech industry hit bottom and bumped through yet another bad year. Microsoft's (MSFT) legal woes continued as a new wave of legal disputes hit the software giant. Big corporations kept their wallets largely closed to new tech spending even though their profits and margins rose smartly as the year progressed. Database king Oracle (ORCL) had another subpar year as new licenses for its products kept falling. And a series of worms and viruses -- most notably the Slammer worm -- crippled large swathes of Corporate America for days on end.
Spammers ruled the e-mail queues as their often-offensive missives eclipsed 50% of all e-mail traffic at big Internet service providers such as America Online (TWX). Unemployment in many key tech trades hovered around 7%, the highest level in decades and a harbinger of massive tech outsourcing that's rapidly shipping coveted white-collar programming and other tech jobs to low-wage but high-skilled workers in India, China, and Eastern Europe.
So what does all this mean for 2004? Fortunately, it looks like the coming year could actually be a lot better, finally. Here are several trends to watch that'll go a long way toward making that so, for both the tech industry and its corporate and consumer users.
The Retreat of Junk and Porno Spam...
In 2003, the level of spam hit epic proportions, causing an uproar loud enough to get action even from the U.S. Congress, which passed the CAN-SPAM Act. Ironically, while all this was going on, the cost of anti-spam software and services had effectively dropped to zero for most average users. All four of the big ISPs -- AOL, Earthlink (ELNK), MSN, and Yahoo! (YHOO) -- now offer free spam protection on e-mail accounts and are actively upgrading those protections for their customers.
At the same time, most personal Internet security companies such as Symantec (SYMC) and Network Associates (NET) have built spam protections into their products as a free add-on. So by yearend 2003, a vast majority of consumers on the Net were already dealing with a lot less spam than just a few months earlier. And by yearend 2004, these measures will have sufficiently contained spam so as to make e-mail usable again not just for consumers but for corporate users as well, given how aggressively most businesses have also adopted e-mail filtering systems. The spam scourge isn't cured, but it's becoming less acute.
...And the Rise of Legitmate Spam
Spam is also changing its shape. Fly-by-night marketers and outright scammers blitzing out millions of blind Viagra (penis enlargement, breast enhancement...) pitches will find it harder and harder to access your in-box. But legitimate companies will resort to spam more and more as they grow desperate to reach increasingly remote Web surfers who have bunkered themselves behind technological measures to stop other forms of online advertising.
As a result, online travel agencies, mortgage companies, ISPs, telecoms, and others will spew out more unsolicited come-ons. Not that it's all their fault. Overwhelmed Web users have no effective way to manage or keep track of which companies they have agreed to receive e-mail from, let alone partners of those companies. And filtering out spam is much harder when it comes from bona fide companies. Even the best spam filters have a hard differentiating between a message from Quicken telling you a software upgrade is available and a message from Quicken flogging its latest online bill-paying service.
A Budding Rebound in Telecom, but Not in the U.S.
The telecom boom and subsequent bust centered largely on the U.S. as incumbent carriers and upstarts alike wrongly assumed the home of the Internet would also be where the most Net bandwidth would be consumed. Now it appears the real telecom rebound is taking shape -- in Asia, where broadband penetration has outstripped that in the U.S. by a wide margin.
Not only are a greater percentage of Koreans and Japanese jacked into the Net but they're also accessing it at much higher speeds. That makes for faster Web surfing and high quality phone service and video-on-demand all delivered over the same wire. With an eye on its neighbors, China is racing to catch up and is sinking billions into infrastructure deployments.
However, in the U.S. the conservative Baby Bells have refrained from making big infrastructure outlays on broadband while they milked their old wire-line businesses, which remain highly profitable and highly regulated. While the Bells have started to announce bigger spending plans, the real bump in telecom will come abroad -- and that means subsequent productivity enhancements from super-high-speed connectivity accrue to the Far East.
China Continues to Flex Its New Tech Muscles
On Dec. 17 Beijing decided to mandate a wireless security standard for devices sold in the Middle Kingdom. The unilateral decision jumped the traditional sclerotic processes of clearing such standards though collaborative international rule-making bodies such as the Institute of Electronics & Electrical Engineers (IEEE). But odds are that companies making wireless equipment will comply to ensure continued access to the fastest growing tech market on Earth.
That's just one indication of China's growing importance. It will soon be the largest market for both mobile phones and PCs. As stated above, Chinese telecoms are also expanding rapidly and are expected to keep doing so as data-starved chunks of the country come online. The upshot? China's dictates on all sorts of tech issues will carry increasing weight in the production of high-tech gear and the management of shared resources, such as the global Internet.
Microsoft Alternatives Finally Start Hitting Desktops
Even though the U.S. economy is on the mend and tech spending is climbing again, the excruciating pressure to reduce costs year after year isn't diminishing. An obvious pain point is Microsoft software. CIOs have started eyeing Redmond's two cash cows, the Windows operating system and Office productivity suite, as targets for replacement should suitable and cheaper substitutes come along.
Of course, it's not like Windows will start disappearing from corporate PC fleets in favor of Linux or Mac OS-X. But Office is facing some serious competition. Sun Microsystems (SUNW) has signed contracts to deploy its StarOffice productivity suite onto millions of Windows desktops, including major deployments in China and in Australia, where that nation's largest telecom, Telstra, elected to put StarOffice on all its machines.
While Linux still isn't ready for prime time on desktops, a tripartite effort by Japan, China, and Korea to develop open-source alternatives to U.S.-dominated proprietary software will put more heat under Microsoft's feet. Don't expect any big shifts in the aggregate, but 2004 will mark the first year of real desktop competition. Watch this trend to see the shape of a possible post-Microsoft world.
PCs Get Friendlier and More Flexible
They'll have to if computer manufacturers and consumer-electronics makers hope to use the PC as a hub for digital entertainment devices. With Sony (SNE), Hewlett-Packard (HPQ), Apple (AAPL), Gateway (GTW), and Dell (DELL) leaping into this fray, something has to give.
It's one thing to rely on a PC for word processing and Web surfing with one or two peripherals and a connected printer. It's entirely different to rely on a PC as a photo album, jukebox, and video recorder/depository. In the insanely competitive PC field most players are seeking to diversify their income by selling more and more add-on devices -- music players, digital cameras, all-in-one printer/scanner/fax/copiers -- which boast higher margins than PCs themselves.
Customers, however, are going to stop buying PCs and peripherals in a hurry if these devices don't connect more easily and allow even the least techno-inclined to burn CDs and manipulate digital photos and video with thoughtless ease. This need could also drive PC makers to more closely integrate various consumer electronics with computers and create more vertically integrated equipment packages. Expect bundling to go way beyond printers and on to digital music players, digital cameras, and camcorders.
These are a just a few of the big shifts that 2004 should usher in. Others include the rise of Internet-based phone calls, increasingly ubiquitous Web security provisions, and an increasing willingness on the part of Web surfers to pay for online content. Add them all up, and you get a tech landscape that'll look quite different from 2003's -- and radically apart from that of even five years ago. By Alex Salkever, Technology editor for BusinessWeek Online