I’ve been blogging a lot about the forces that are shifting the networking and IT landscapes. There are so many it’s tempting to say that they make forecasting the future as hard as forecasting the weather. Except, of course, everyone probably looks at weather forecasts several times a day. No matter how many butterfly wings are fluttering in distant lands, we still can stick our fingers out the door and see what’s happening now, and maybe get a sense of how all that fluttering is aligning. Let’s try that with tech, starting here by looking at the shifts on the opportunity or demand side, and following on with another blog to look at supply-side shifts. First, though, let’s set the stage.
Remember how, back in the 1980s, long-distance calling was such a great revenue opportunity that companies went to regulators and the courts to demand it be opened for competition? Remember when you got a telephone with your service turn-on? Today, long-distance calling is free. Today you get a service when you buy a phone, because telcos use phones for differentiation. Operators globally are finding it harder and harder to sustain profit and to continue to invest in networks. The network service business has commoditized.
Remember how, thirty years ago, telcos made half their revenue from business services and there was essentially no consumer data market at all? Remember when a company who had a 1.544 Mbps T1 line was right there on the leading edge, and if you had a 45 Mbps T3 you were god-like? Today, a consumer with T1-speed Internet access would be way below second-class, and even 45 Mbps would be declared by regulators to be underserved. The fact is that dedicated business services are dying. Everything is going to be Internet and access to Internet. And that is the area where revenue and profit for providers is hardest to earn.
Remember how, twenty-five years ago, IT budgets were divided at 40% to sustain current infrastructure and applications and 60% to open new missions and capture new benefits? Remember when network services were the missing link in distributing and collecting company data, and QoS was the critical factor? Today over 85% of budgets are about sustaining the status quo. Today, all enterprises want from network services is lower price. The business cases driving new enterprise tech investment have dried up.
All of this adds up to what we can call our baseline. Tech has lost differentiation. We can see this even in Apple’s performance. Here’s a company that has consistently thrived on being a trend-setter, and it just announced its first truly new product (AR/VR glasses) in over six years. The focus of communication has shifted to delivering experiences, not to connecting us. That means that the product has changed—we need to generate experiences to deliver or delivery doesn’t matter.
OK, baselining is over. Now we have to look at how these conditions are creating market shifts. We’ll start with the shifting sands of opportunity.
The most transformational thing that’s happened to network opportunities, and to tech overall, is the smartphone. Smartphones take information portals and stuff them in our pockets or purses, connect them without wires, and provide us with a set of applications that are already worming their way into the very way we live our lives or do our jobs. If past advances in computing were created by bringing IT closer to each of us, then smartphones are only one step away from something like brain implants. But even smartphones are commoditizing; the fact that telcos can attract customers by giving them away means that most people wouldn’t keep refreshing their phones annually if they had to pay for them on their own. Even smartphones need that next big thing. Of course, tech publications need that too, for something to write about.
That means that, on the demand side, we can already see a lot of interest in the next big thing. What we have on deck appears to be three separate movements. The first is the AR/VR shift that Apple and others are betting on. The second is AI, loved by all, and third is the metaverse that Meta has tried to popularize. All, I think, are dependent on another shift that’s not really all that visible.
The connection between AR/VR and the metaverse is fairly clear. The metaverse is a virtual world, and AR/VR is a better way of making that virtual world look real. Apple’s announcement demonstrates an issue that makes the connection between the two more profound, more important. To make AR/VR experiences valuable, they have to be created in a way that exploits, or can exploit, AR/VR’s special properties. Immersive, three-dimensional, you get the picture. If we had a metaverse, we could create experiences from the collective behavior of people, making the special stuff self-authoring.
The challenge here is that while this works for entertainment, for consumerism, it’s not as clearly valuable in business applications. Virtual meetings of avatars? Interesting, but not likely something companies would invest a lot in. Educational/training? Sure, but we’re back to having to generate specialized experiences in that space to exploit AR/VR. Otherwise, a screen works.
The connection with AI is a bit more complicated to make. Yes, AI is hyped as much or more than the others, but there’s a deeper connection there too. If AR/VR makes the virtual world look real, you could argue that AI could help with that, but it could also help make the real world look virtual. Both AR/VR and the metaverse are tied to the concept of self-authoring experiences, and AI has the potential of making that a lot easier. Generative AI after all is about generating, and the process of creating an AR/VR image is a lot of that. In metaverse terms, the goal is to create a model of a virtual world where real-world speech, movements, and surroundings are in part mirrored. That means first creating a complete model of that world, and second representing that model from the point of view of each participant. Sounds AI to me, but this matters to business only if AR/VR and metaverse matters.
This is where the broader view of metaverse comes in, what some have called the “industrial metaverse” and I’ve referred to as the metaverse of things (MoT). Creating a model of the real world from humans that become avatars isn’t much different from creating a model where an assembly line becomes a sequence of steps, sensors, and “effectors” (this is a popular term in robotics, so I’ll start using it to represent devices/elements that can influence the real world) that represent, sense, and make changes to the environment. If we were to develop the AR/VR/metaverse symbiosis as needed, which a lot of powerful players are working to do, then stepping off into MoT would be easy.
OK, that’s the demand-side picture. We’ve got a lot of players pushing those three things, so if there’s going to be any fundamental change on the opportunity side, it’s playing those trends that will create it. But what about the “playing”? The supply side is next.
