KUHN CAPITAL Tuesday, October 17, 2017
Dispatches from the front

The Big Five: Tech Trends That Matter
(6/12/2005)

June 2005

The analysts at Gartner say they have identified five hot technologies or processes that will drive the use of IT for the foreseeable future. We have a sixth.

Gartner's five are:
Outsourcing
Open Source Software
Voice-Data Convergence
Service-Oriented Architecture
, and
IT Utility

Most of us already know and agree with the promise of the first three listed, Outsourcing, Open Source Software (OSS) and Voice-Data Convergence (VDC).

Before we lose you on the last two, Service-Oriented Architecture (SOA) and IT Utility (ITU), we’ll explain them below simply. Then we’ll conclude with why we believe all these trends will grow at rates substantially less than those forecasted by Gartner.


Service-Oriented Architecture
In a word, SOA software is built from a library of business process modules, standardized components that may be linked together in unique ways to fit the environment of the client. Where customization is needed, it’s isolated to the modification of specific modules. This approach obsoletes “bloatware” like Microsoft’s Office suite, stuffed as it is with numberless features, most of which nobody uses and many of which are just annoying.

SOA is also designed to be delivered in an application service provider (ASP) environment where users download and “rent” only those processes they need, a by-the-drink pricing model.

So Gartner sees SOA used in 80% of software development projects by 2008. While we find this forecast aggressive, we’re cheering the technology on for its promise to free us from those grasping one-size-fits-all license fees.


IT Utility
In the world of ITU, the boundaries between your computer system and those of others vanish. Instead of utilizing your fixed-cost hardware and software only periodically as the need arises, you’ll join with others in sharing your -- or a third-party’s -- resources, an approach that can obviously generate big savings. Gartner says ITU will be used by 25% of large corporations by 2010.


Outsourcing
Gartner claims that by 2015 about one-third of traditional US software coding and system maintenance services will originate in emerging markets like India, China, Russia and Brazil, though India -- as the most mature entrant -- will see labor costs rise substantially. In fact, we think penetration of the American market by at least the established overseas vendors may occur even more rapidly than Gartner's estimate in the near-term.


Open Source
OSS code is made freely available, allowing anybody to modify, extend and improve it. We like that Gartner believes OSS will gain traction, maybe making good on its promise as another vehicle to deliver us from the iron grip of overpriced license fees. In fact, Gartner argues that software vendors will survive OSS by substituting service fees for license fees.

Not willingly. We think entrenched vendors like Microsoft -- correctly perceiving OSS as a dagger to the throat -- will throw a good chunk of their cash ($60 billion in Microsoft's case) at the task of delaying, borging, or otherwise killing OSS developments, followed by license fire-sales. They’ll do this because, for the average small-medium enterprise or individual PC user, services fees won’t approach the aggregated price of licenses. Second, it is the rare software vendor whose service margins resemble those it generates in a product sale (that is, unless they outsource, and even that technique is just another delaying tactic). Nonetheless, Gartner says by 2008, 95% of Global 2000 corporations will be shopping the OSS market.


Voice/Data Convergence
Gartner believes IP telephony and VoIP, or the delivery of voice via the Internet, will be taken up by more than 95% of major companies by 2010, thereby inciting carnage among telecom carriers and inspiring much heated debate in Foggy Bottom on the subject of lost taxes. In our opinion, of all Gartner’s hot technologies, this is the hottest.


Now for the Cold Dash of Water
What one vulnerability do all these trends share? Each is dependent on computer-to-computer communication via the spam-infested, virus-laden Internet. And in the case of Outsourcing, the security risks are compounded by doing business in countries like China and Russia where the rule of law is, ah, tenuous.

So we wish these trends the best: they’ll all good for end-users, and by extension, for business in general, if not for software publishers. But what crosses our mind when we read of such hot developments is what may be the hottest future technology of all, bullet-proof data exchange.

Ryan Kuhn


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