Whatever we remember 2005 for, we can all agree it was the year blogs exploded in numbers. And bloggers, shy as we are, are not hesitant to look ahead. But scanning the many blog projections for technology in 2006 we see a majority focused on Web 2.0 - Google this, Flickr that. Of course, with Apple and amazon.com enjoying a bumper holiday season, the focus on consumer technologies is only accented.
Much as I love Google, it cannot process BOMs for the average manufacturing company. Much as my daughter loves her iPod, it will not process insurance claims. Whoever does whatever with AOL will not improve supply chain logistics at UPS.
As we did in the last Internet Bubble, we risk making the Web and consumer technologies the center of the technology world. It's the Gates/Plattner scenario again I wrote about earlier. As I wrote in Florence during the Renaissance, innovation is happening in a number of other areas which CIOs are actually much more excited about - especially at amazing new price points. But as I have written in several columns this year, many elements of enterprise technology spend are also grossly overpriced.
So, here's my forecast for next year - good and bad - with more of an enterprise focus, unsexy as that may be relative to Web 2.0:
1) SAP, Oracle and Microsoft (around enterprise software) will have tough years as pricing pressure intensifies on core products, particularly on maintenance revenue streams. SAP will de-emphasize its web services talk and go back to focusing on applications and business payback. Oracle will go the other way and talk more about architectures as it masks the enormity of rationalizing its various application acquisitions. CIOs will increasingly question if all they are doing is subsidizing Microsoft's intense focus on Google. It is behind its own schedule or its competition in so many areas CIOs want to hear about - from Vista to Business Solutions (Dynamics)
2) We will see version 2.0 definitions of CRM, SCM, HRM etc - almost every software category - emerge which will a) redefine process coverage (e.g. CRM is more than SFA and call centers, SCM is much more than planning and optimization) that the market leaders have chosen to define the categories as and b) utilize appropriate, newer technology building blocks - GPS, RFID, RSS, predictive analytics in the category re-definition process.
3) CIOs in many non-manufacturing verticals will tire of waiting for robust software solutions for their major engines (claims processing, trading systems) and more aggressively look at BPO options to support these processes. These CIOs, especially in financial services verticals, will also pioneer attempts to leverage web 2.0 driven discovery and social networking tools with their enterprise applications.
4) An infrastructure vendor - likely Dell (or Sun as it tries to redefine itself and if it can get over its allergy of labor intensive products) - will introduce infrastructure outsourcing at aggressive, "utility" price points to cover a wide range of network, database, desktop and other services. In its hype cycle for outsourcing Gartner defines infrastructure outsourcing as one of the most mature. As systems management automation and offsite, shared labor models mature, an efficient services "supply chain" becomes much more viable.
5) A generation of "appligators" will emerge - small systems integrators which specialize in innovation areas like web services or telemetry and willing to work with clients in small, intense teams. We will not be able to tell till 2007 if they are of a more modest breed than their predecessors, the Scients, Viants around the ebiz boom in late 90s.
6) Large US and European outsourcers (EDS, Accenture and by extension IBM, HP etc) will find themselves squeezed between a) private equity firms who want to take their valuations from 1 or 2X revenues to close to 10X many of the Indian vendors enjoy and b) CIOs who want price points much closer to what Indian vendors can quote. This will force these outsourcers to finally get serious about becoming much more efficient with automation, shared services, global delivery models etc. They will find Indian vendors expanding into horizontal process consulting and BPO (finance, HR) beyond their traditional IT competencies.
7) An emerging truism in global sourcing circles is to look to China for low cost manufactured products, but to India for services. We will see China start this year to challenge this assumption and also flex its muscle around software and services. The Chinese GDP was recently "updated" by another $ 300 billion. Apparently they had "forgotten" to count their growing services sector.
8) SaaS models will come under increased scrutiny from buyers about stringent SLAs and business continuity plans. In 2001, after the India/Pakistan nuclear war threat, Indian vendors went through a similar spike in scrutiny. After last week's well publicized outage at salesforce.com, this will become a required due diligence step in evaluating SaaS options. The scrutiny helped Indian vendors mature - it will similarly increase corporate confidence in SaaS.
9) CIOs will do serious "spend management" around storage (due to proliferation of volume demand) and telecommunications (due to proliferation of mobile, broadband and other products) investments. For all the promise of VoIP and free municipal WI-FI, the reality is telecomm services are still the single largest category in IT budgets. Most CIOs would also love to avail of Google Mail's 2.7 gigabytes of storage for free!
10) Finally, one more of a prayer for the US economy than a prediction. Realize 2006 is an election year and Enron's Ken Lay will finally go on trial - but Gartner predicts 15% of 2006 IT budgets will be related to compliance with Sarbanes-Oxley. And as we know in different industries we have other compliance expenses related to FDA Validation, HIPAA etc. This is a tax American corporations have to pay that most of our global competitors do not. So, I predict CEOs will start lobbying Congress to back off on the compliance burden. It has been 4 years since the Enron scandal. Today global competitiveness in a "flat" world is a far more compelling issue than compliance.. So I predict the SOX gravy train for many software vendors and auditors will slow down in 2006.
This plus 6 quarters may buy you a cup of coffee at Starbucks! Today plus 4 fiscal quarters out, a version customized by Zodiac signs is planned if a fraction of these predictions come true...