Karlin Lillingtonidentifies five trends to look for in the technology sector in 2009
IT GOES without saying that the economy will drive the fortunes - or lack of them - for the information and communications technologies sector in 2009.
Looking ahead, though, a number of key issues and concerns seem likely to dominate headlines and the minds of company management in the coming year, some directly connected to the ongoing downturn, which shows no signs of improvement in 2009.
Others arise out of the natural developments and crossroads within given subsectors and would be present regardless of whether the economy was a stampeding bull or a growling bear.
1. Consolidation
This has been a growing trend for the past couple of years among some of the tech giants, but recessions are when the big companies really lick their lips and go on buying sprees, like well- heeled girlfriends hitting New York in January with their flexible friends. The smart-tech giants will buy prudently, filling gaps in their product and services portfolio, perhaps eyeing up the small companies making inroads into the more leading edge areas as well, to be positioned for technology's ever-elusive Next Big Thing.
Meanwhile, well-positioned medium-sized companies with some cash in the bank (assuming their bank is still there) and steady nerves will grab the opportunity to grow via acquisitions. Look back over the past few years or decades and most of today's big names will have been the medium-sized companies that seized the day during previous downturns.
2. Making money from social networking services and products
Starting with the rocketing growth of blogs and internet messaging programs over the past few years, the ground has been prepared for a huge range of what are broadly termed social networking, or sometimes Web 2.0, technologies.
Many have worked their way into the business environment as well as election campaigns - witness Barack Obama's extensive use of e-mail, blogs, Twitter (mass text messaging) and other Web 2.0 elements.
However, as is often the case with cool internet-based technologies, finding a way to actually make money from them remains a major conundrum.
The readiest answer is some sort of advertising revenue stream, or offering the product as a supported service, but not every technology is suited to advertising and as advertising spend is likely to be reined in as well in 2009, there's only so much to go around.
The holy grail is to make something so compellingly cool that a very big cash-rich company buys it (mainly on the basis of it having millions of users) to see what can be done with it - as with Google and YouTube, (which still makes little money).
This solution obviously only will work for the very few and fits in with the consolidation trend noted above, but many acquisitions are going to be last-gasp chance affairs where otherwise the smaller company faced savage cutbacks or folding up its tent.
Small companies really want to be bought when the market is good and their valuation is strong, not when they are cheap fodder.
3. Privacy moves to the middle
Privacy, whether it be management of personal information or digital rights management, is moving away from the end and in to the middle, a major shift in how the organisations which want information on who you are and what you do online (read: law enforcement, governments, media companies such as music and film producers) try to control the privacy game.
For a decade or more, it's been primarily a one-on-one affair, with the big organisation, whatever it may be, trying to track the end-user or individual. Thus law-enforcement conducted surveillance on the individual and music companies took individual music file downloaders to court in highly publicised and unpopular copyright trials.
Now, the big organisations are instead moving to the middle - to intermediaries such as internet service providers and mobile phone companies who manage the networks used by the individuals - to try and get at them in this way.
By trying to acquire potential access to large swathes of user data or forcing the network operators to monitor for certain types of activity, organisations might gain a number of benefits.
The cost burden of surveillance and management of data is shifted on to the intermediaries; the surveillance activity goes further out of public view; the intermediary can potentially be sued for "allowing" activities and vast quantities of data can increasingly be searched in sophisticated, time-saving ways.
So far the response of the intermediaries has been fairly muted and has not garnered much public attention but expect to see this issue come to the fore as we conduct ever more of our lives online and leaving digital trails.
4. How to go green
Going green isn't just about being environmentally and socially aware. As a matter of fact, for most organisations those elements will not keep the management lying awake at night. Instead, it is a simple issue of rising costs. For companies that process increasingly large amounts of data and need the hardware to do so, costs of running data centres - which can have energy usage the equivalent of a small town - are an alarming part of the budget.
Yes, pressure eased over the past two months somewhat as the price of oil dropped, but the energy bill for organisations will be a big, big issue in 2009.
Areas such as Silicon Valley have already experienced rolling brown-outs and creaky infrastructure everywhere around the globe is under pressure so expect lobbying on these issues and a focus on driving the cost down as much as possible within organisations.
5. How to develop our own technology companies
Finally, a huge issue for the Irish Government and for technologists around the country: how to encourage the growth of the indigenous technology industry in rough times. It has been hard enough during the Celtic Tiger to push homegrown companies into the medium leagues, much less break through to the big leagues (generally considered to be a $1 billion market cap).
Those that did reach those heights did so in the late 90s to 2000 "bubble economy" of soaring valuations and either vanished (Baltimore Technologies) or ended up being sold as a slimline version of its former self (Iona Technologies).
The tech smarts are definitely here. A lack of broader management experience and poor understanding of sales and marketing, especially into the crucial (and brutal) American market, remain two of the biggest obstacles to growth for indigenous companies. How Enterprise Ireland and Irish companies themselves work to overcome these problems and prepare for the next inevitable bull run has to be the most critical "big picture" issue for 2009 and beyond.
