As ever, Silicon Valley defies tidy packaging. Trying to establish one single direction for its technology in 1998 is fruitless. There is too much venture capital money, too many bright ideas and way too many early adopters who'll try any gadget the Valley invents. The area is by no means, however, isolated from the rest of the US or from global markets.
Continuing turbulence in Asia has made venture capitalists somewhat more cautious. UberVC's John Doerr, quoted in Fortune says "venture capitalists are a little more sensitive to valuation than before". However, he does point out that the $10 billion (£6.9 billion) raised in venture capital in 1996 was 100 per cent greater than the amount in 1995, so there's still plenty of money to follow a bright idea or a hot management team.
Generally, the big money still follows the Internet, and will continue to do so in 1998.
Almost every company here is trying to develop a method to make access to it faster, generate sustainable advertising models for it, create compelling electronic commerce (or ecommerce) websites on it, or otherwise find a way to make it gush dollars.
The investments are significant, but the payoff is enormous. To take one example, retail sales in the US for the month of November were $213 billion. Online merchants are expected to sell around $1 billion of merchandise in November and December this year.
That $1 billion is staggering, considering that a few years ago the great debate was about sullying the pristine Net with base commerce, but there is still a long way to go as more households and businesses become more comfortable with transacting business on the Net.
The market recognises this opportunity, and richly rewards those companies that can create the right environment for e-commerce, such as Excite, Yahoo!, E*Trade and Amazon.com.
However, if e-commerce is a "killer application" the reason many people log on and use the Net in the first place then one of the most urgent tasks facing Silicon Valley and indeed the whole technology business, 1998 is finding ways to solve the incredible bottlenecks that greet many users as they try to go online.
Regis McKenna, veteran Valley marketing maven, says the nature of technology is such that "the elapsed time between demand and gratification should be zero".
In his book, Real Time (Harvard Business School Press), McKenna refers to "the galloping expectations of the technology-toned consumer". So companies that are addressing this issue are getting serious attention from the media, Wall Street and investors such as Intel, which needs to keep finding reasons for customers to buy ever more powerful PCs.
@Home, for example, has achieved a $2 billion stock market valuation with just slightly more than 50,000 users for its Internet service delivered through cable modems. Microsoft has invested $1 billion in cable provider Comcast and is discussing a major investment with TCI, the leading cable TV company, to provide the next generation of digital TV settop boxes that populate millions of US living rooms. This will definitely be a focus of attention over next year.
Many companies are developing various types of diskless computers below $800, dubbed Network Computers (NC) by Oracle's Larry Ellison, who is trying to build a business by licensing his NC design to hardware manufacturers.
Mr Ellison is not having much luck in the business environment with NCs nor are any other vendors but there are a number of trends converging which are taking the NC idea back to the living room, where it is combined with the TV to make a rehash of the Interactive TV concept so expensively attempted two or three years ago.
The NC design competes with several others for the right to combine computing and TV, including the Microsoft-led design that TCI is looking at and the latest version of the WebTV device, made by a recently-acquired division of, yes, Microsoft.
Over the next year TV stations will start broadcasting in a new, digital format so there is great impetus to use this opportunity to upgrade America's television sets and what they do. Manufacturers don't want consumers to be couch potatoes anymore, but to be active participants in programming, surfing to on-TV websites to find out more about the story being discussed and going online to purchase what is being shown on the programmes.
For example, a traditional TV cop thriller set in San Francisco would have an onscreen link to get biographies of the stars, and another link to buy the clothes they are wearing and get travel information for weekend trips to San Francisco.
All this activity for consumers masks a dirty little secret in Silicon Valley there are few reasons for consumers to upgrade their PCs in 1998, apart from the increasing complexity of 3D games demanding more processing power.
This aside, more powerful PCs just heighten the frustration of getting to the Net, because you just reach the bottleneck faster. Intel, recipient of a large proportion of the consumer dollars for PCs, is acutely aware of this, which is why its investing heavily in ways to "broaden the bandwidth", allowing faster Net access for home PC users.
In industry as well there may be a backlash developing against the relentless cycle of PC upgrade. 1998 could be the year, as Dataquest analyst Mike McGuire says, "that industry may rise up and say 233MHz Pentiums with MMX is enough".
There is no significant reason for businesses to upgrade their PCs in 1998, especially as Microsoft has been forced to delay the introduction of its industrial-strength Windows NT 5.0 software.
Don't cry for Microsoft, however. Version 2.0 of their operating system for smaller hand-held devices, Windows CE, will be, according to Mr McGuire, "huge", appearing on lightweight sub$900 devices. The trend of miniaturisation in general will continue, with companies such as VLSI putting more and more processing power onto a single chip for integrated products such as telephone/pager/e-mail devices and entertainment products such as powerful video game units.
There is so much else that companies here are working on such as online chat, which will be covered in a later article, and biotechnology. But it is clear that the opportunities offered by the accelerating trend towards ubiquitous, fast Net access will occupy the minds of Silicon Valley's finest engineers and moneymen in 1998 and into the millennium.
Frank O'Mahony lives and works in Palo Alto, California. He can be reached at
