Earthquake

Earthquake

On 21^st Sept 2010, Richard Holway gave his Annual “State of the ICT Nation” Presentation for Prince’s Trust Technology Leadership Group in an event sponsored by BT, and introduced by Jeff Kelly, CEO of BT Global Services at BT Tower.

The CEOs from 50 of largest ICT companies operating in the UK market attended both the presentation and the dinner afterwards.

Richard Holway is Chairman of TechMarketView LLP and Vice Chair of the Prince’s Trust Development Board. Holway was one of the founders of  the Prince’s Trust Technology Leadership Group.

Summary

Earthquakes don’t just happen. They are the end result of huge pressures built up over long periods of time. Indeed, it is very like the seismic shifts that are taking place right now in the ICT industry as the tectonic plates of the old and new business models rub up against each other with earth-shattering consequences.

Holway’s speech is the 12^th in the series he has presented for the Prince’s Trust since 2002. Indeed these speeches alone have raised over £850,000 for the Trust.

Each of the current seismic shifts have been identified in those previous speeches and this year’s speech brings them all together to demonstrate that the industry is facing the most explosive period in its 50 year history.

Some specifics

ICT is deflationary

In 2002, Holway warned that the ICT growth was unlikely to exceed 1x GDP. Indeed Holway contended that the ICT was deflationary. Although this was highly contentious at the time it proved to be somewhat optimistic. The ICT sector ended the first decade of the new millennium with a lower share of GDP than where it started.

Holway will renew his forecast for the next decade to 2020 when, yet again, ICT growth will be <GDP growth. This is mainly due to what Holway describes as ‘Cold Tech’ – a whole range of advances and changes which actually shrink the ICT market. Eg the significant growth of offshoring in the last decade. In the next decade, Cloud computing will provide major benefits for users but at a much lower cost; greatly affecting the revenues and valuations of those suppliers dependent on the old ‘on premise’ model. Those that can’t change their business models fast enough will disappear.

Public Sector ICT spend

In the short term, the sector is facing another seismic shift as the reductions in public sector ICT spend are actioned. Holway announce the biggest reduction in forecast growth rates since he started as an analyst  25 years back in 1985. Rather than the 3 years of decline between 2008-2010 as previously forecast, five years of decline are now expected with only minimal growth in 2013 to break that run. The public sector has been ‘the lifebuoy’ of the industry for the last 10 years and now represents over 30% of ICT revenues - indeed, 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.

Holway’s Martini Moment

Back in 2003, Holway forecast the rapid growth of MIDs (Mobile Internet Devices) and the advent of a new era of being able to access the internet ‘anywhere, anytime and from any device” (Hence the Martini Moment..)

Holway used this year’s speech to forecast that:

• By 2020 over 90% of the 11b devices capable of accessing the internet will be MIDs – a category which didn’t exist in 2000 and even today represent <40% of  devices.
• Within a couple of years more hours will be spent accessing the internet on MIDs than via fixed-line devices.

Again the effect that this is and will have on everyone from computer manufacturers, to mobile phone suppliers to telecomms companies will lead to greater and faster change than anything so far experienced.

Social technologies

In 2007, Holway warned that social technologies would have huge effects on the enterprise. With bets being taken on how soon Facebook will have 1b users, that would mean than a majority of the all the people in the world with access to the internet had a Facebook profile…

All businesses will be affected. Reputations will be made and destroyed by social technologies.

MyTop

In 2005, Holway introduced the concept of his MyTop – a personalised portal to the Cloud. Holway contends that Facebook is now as close a fit to his MyTop concept as you can get.

Holway predicted that the combination of MIDs (as above), Apps and MyTop/Facebook will wreak havoc on the business models of many of the leaders. Indeed, Holway now predicts that Google’s current model is the one most at risk.

Shape of things to come

In 2005, Holway warned that companies could not expect their current business models to work in the new, changed environment. Since then Holway has used the music industry as a portent. Revenues from physical sales of music have slumped and revenues from digital downloads have failed to compensate as users moved to MP3 players. But the UK music industry is in rude health – growing by 4.7% in 2009 – because of major growth in revenues from live music and B2B (eg use of music in advertising)

Holway believes that the publishing industry is the next to face that change and is very sceptical that subscriptions or advertising will compensate for the move from print to online readership. New revenue models must be created.

The same will apply to the software industry where the move to Cloud will destroy the old product licence ‘cash cow’ model as much software becomes ‘free’. Again new models are required for survival.

Year of the Tablet

In his last ICT Leaders speech in 2009, Holway predicted that 2010 would be “The Year of the Tablet”. Largely ridiculed at the time, it has come to pass in spades. Holway says that the acceptance of the tablet (and iPad in particular) has been the fastest move to ‘mainstream’ of any technological innovation he has seen in his lifetime.

Holway predicted that tablets will be a major category of MIDs in their own right with many users having multiple tablets. Holway also predicted their wide-spread use in the enterprise. Again, these changes will have significant effects on the fortunes of the current main players.

Earthquake

This series of innovations and changes are now all happening simultaneously. The ICT industry and its main players are in for the biggest period of disruption in their history.

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.

More information from:

Richard Holway
Chairman, TechMarketView LLP, PO Box 183, Farnham, Surrey, GU10 1QX

Tel: 01252 781545 rholway@techmarketview.com www.TechMarketView.com

Posted by Richard Holway at '14:49'