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Analyst predicts tech 'earthquake'

28th Sep 2010
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In his annual "state of the industry" address, analyst Richard Holway warned of seismic shifts that are threatening the foundations of the technology industry.

The information technology and communications industry ended the first decade of the new millennium with a lower share of GDP than where it started, he noted in his annual State of the Nation presentation in London last week. But the post-Y2K scenario is likely to get even worse as new 'cold tech' trends such as offshoring and Cloud Computing start to bite.

Cloud Computing will be a boon for users by lowering their costs, but will depress the revenues and valuations of traditional IT suppliers who depend on 'on-premise' software business models.

The brutal round of government spending cuts will hit almost as hard. "The public sector has been the lifebuoy of the industry for the last 10 years and now represents over 30% of ICT revenues," Holway said, "Many of the larger players have over 50% of their revenues from that sector. So the effects on company performance – including stock market valuations – are going to be pretty devastating."

Another disruptive force is what Holway calls "the Martini moment" with the arrival of internet access "anywhere, anytime and from any device". By 2020 he predicts that 90% of the 11 billion global systems capable of accessing the internet will be mobile internet devices (MIDs), a category which didn't exist in 2000 and already represents more than 40% of net devices. Within a couple of years, more people will be accessing the internet from mobile devices than via fixed-line devices.

Leading the MID charge will be tablet devices riding on the coat-tails of Apple's iPad. The iPad's launch fulfilled Holway's prophesy that 2010 would be "the Year of the Tablet" and represents the fastest move to the mainstream of any technological innovation in his lifetime.

The combination of MIDs, apps and social media such as Facebook will "wreak havoc on the business models of many of the leaders" he warned, with Google's current model being one of the ones most at risk.

The music industry has already been through the kind of disruption Holway is predicting for technology. As revenues from physical sales of music slumped, digital downloads failed to fill the gap for traditional record/publishing companies. But bigger income streams from live music and advertising-supported services such as Spotify have been opened up to sustain the industry in new areas.

A similar transition lies in wait for the software industry where the move to Cloud will kill off the old 'cash cow' software licence model and new entrants carve out niches for a different kind of software business.

Because all these innovations and changes are happening simultaneously, the ICT industry and its main players face the biggest period of disruption in their history, Holway said.

"Only the best built buildings survive earthquakes. Few ICT companies will survive intact. Some of the ruins will be acquired and rebuilt. Some will fail completely. The new open spaces created will enable new companies to grow and prosper – just as Google was created and built to its current position in the last decade."

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