What is the future of tech? A lot of Wall Street professionals and a lot of investors are asking that question, given the NASDAQ correction. The problem with using stock prices as a measure of a market is that short-selling behavior can induce a slump just as easily as real market conditions. That obviously doesn’t rule out a real issue with tech, so we need to look at things.
Stuff sells because people want or need it. Consumer technology sells largely based on quality-of-life value, which can be based on fundamentals or on nothing more than standing tall with peers. Business technology sells based on ROI, meaning that if a company gains a benefit from something that meets their rate-of-return expectations, they’re likely to adopt it. Are either of these forces subject to change now?
On the consumer side, there’s not much question that people are whipsawed by the shifts in COVID. When the virus first came along, both people and companies changed behaviors to limit risk, and any behavioral change results in a shift in those tech value propositions. I can’t go out, so I have to rely more on in-home entertainment, so there’s an uptick in streaming services and gaming. My workers have to stay home, so I have to support remote work technology.
But when vaccines and Omicron seemed to drive down the actual risk associated with contracting COVID, people and companies started to shift again. That’s where we are now. Netflix turned in a disappointing quarter, and Peloton said it was shutting down production for a time to respond to lower demand. Neither of these is a surprise, and no rational investor would be spooked by the move. However, that doesn’t mean that those companies’ stocks aren’t less attractive, so some downturn would be expected. The downturn, though, should be balanced by an upturn in stocks that reflected the pre-COVID purchase patterns.
Stock prices are set by the number of people trying to sell versus those trying to buy, and the level of determination of both groups. The “value” of the company figures in only insofar as it impacts this buy/sell balance. Over my time working with and in the market, I’ve seen a shift from value (“fundamentals”) investing to buy/sell-balance (“technical”) investment. It changed how the market works, and that makes me wonder whether we’ve seen something similar in the way technology itself is bought and sold.
The majority of people today don’t have WiFi 6, and we’re already talking about WiFi 7. 5G’s success is assured at one basic level, but the value of the extended capabilities (like network slicing) is still up in the air, yet we’re talking about 6G. If you threaten a technology that’s not even fully adopted with obsolescence, how credible is the investment in either the current or the new generation? Why is this happening?
One reason is the consumerization of technology. Up until the 1990s, there was no consumer data services market. Today, consumer broadband is the largest data market. Up until the 1970s, there was no personal computing technology, and today the total processing power of computers sold to consumers dwarfs that sold to businesses and governments. Ordinary people don’t do ROI calculations on their tech purchases; they buy what they want as long as they can pay for it. And they don’t understand “tech value” in any deeper sense, so they don’t respond to stories and advertising that goes deeper. It’s excitement that matters.
Consumerization has also pushed tech toward what I’ll call the unitary purchase model. I buy something. The something I buy isn’t related to my purchase of past somethings, but to the specific interests and information that drive me at the moment. I surely, as a consumer, don’t think about advancing my technology state with a series of incremental investments that only give me my goal at the end of the process. Instant gratification.
These shifts don’t necessarily apply to business, but they end up doing that nevertheless. A corporate buyer is a person first and a worker second. How many times does a buyer have to read about WiFi 7 before they start thinking of it as a business technology as well as a personal one? If they do start, can they find (in the information sources they’ve first seen WiFi 7 discussed) the real value propositions?
Business technology advances as an ecosystem, not as a series of disconnected products. We can’t get the benefits of 5G or edge computing just by waving our hands, or by promoting what could be done with them eventually. We have to make a business case, and for transformational technologies that business case will require both a building of a technology base and the building of a business case. Just having something doesn’t justify it, so what does? What would those applications need to justify their own technologies?
Since the dawn of commercial IT in the 1950s, we’ve seen three ecosystemic waves of IT advance, the last of which ended roughly in the year 2000. We’ve had none since, and is it a surprise that “tech consumerism” took off in the ‘90s? We are missing some ingredients that drive a fundamental technology shift of the kind that produced one of those IT waves, waves that drove tech spending up almost 50% faster than GDP growth.
What are we missing? Three things, I think.
Thing One is a holistic sense of the future. What are we actually moving toward in our next tech wave? How will it fundamentally change our lives and our businesses? Without a sense of this, it’s going to be difficult for enterprises to make a business case to get to that future.
Thing Two is self-valuing steps forward. We can’t defer the benefits of a technology revolution without deferring the costs, which means nobody can make money until some benefits arrive. The steps to the future don’t have to justify the future, but they do need to justify the steps themselves.
Thing Three is buyer education. Workers and consumers are the same people but different roles. We can’t let ourselves fall into consumerism-based marketing when we’re trying to sell business technology. The next step forward in the cloud, or the network, or the end-points, can’t be promoted by saying it’s cool and your friends will be jealous if you don’t buy it. We have to show how that holistic future is created and how the steps work.
Most of these problems can be solved by vendors, because in truth vendors had a big role in creating them. It wasn’t their fault alone; Sarbanes-Oxley and the fallout of the tech crash in 1999 tried to reign in speculative valuations by requiring a link between stock price and fundamental growth. What that ended up doing was encouraging companies to focus on the coming quarter or the current year, and made it harder to develop technologies that had legs.
The current market conditions are likely a blip, though market slumps have a way of feeding themselves. Vendors in the tech space need to decide now whether the conditions that lay us open for this sort of thing are going to be accepted for the future. They don’t have to be, but the status quo is what we’ll get if we don’t see some progress in ecosystemic, strategic, thinking. We’ve gamed the status quo about as much as we can expect to, so if we want a better future for both us-as-workers and us-personally, we need to step up and do the right thing.
