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Tech Predictions For 2007

Column: The Bleeding Edge

From the January-March 2007 Issue & 2007
Tax Season Survival Guide

If the technology scene in 2005 was too boring for words, 2006 was downright
strange. The major re-write of the Telecommunications Act, which would have
overhauled video franchise rules nationwide and stimulated new investments in
broadband, never got off the ground. Technology policy at the national level
got bogged down in the debate over “network neutrality,” which no
one could define but about which everyone had an opinion.

The world discovered social networks, but by the time the year came to an
end it was once again clear that teens are fickle consumers. MySpace had already
become “so yesterday,” YouTube was pestered by copyright issues,
and only Google seemed to be holding its own in terms of stock values. Elsewhere,
the statute of limitations ran out on most of the charges pending against AOL
executives for financial misconduct … with virtually no charges filed.
AOL itself went quietly into the night, swapping its Internet/online service
persona for a more lucrative ad-supported portal. Earthlink continued to look
for a path to survival, but without much luck.

And then there was the election. It took up so much time, so much advertising,
and so much raw energy that there simply wasn’t room for much technology
news to filter through. What little news we heard was mostly bad — as
when people distressed over the limited quantities of the new Sony PlayStation
and resorted to shooting one another to steal them. As for the predictions we
(at Kent Associates) made with such confidence at the beginning of the year,
our score was less than sterling. Here’s the scorecard.

2006 Predictions
& Results

Prediction: Television
will come to the cell phone.
Actual Results: It’s a small
audience so far — only about 7 million Americans. But it is being
carefully watched by TV execs, who note that those who watch TV on the
tiny screen become more loyal viewers on the big screens as well.


Prediction: WiMAX wireless will
be a flop.
Actual Results: Not just a flop,
but a complete non-starter. Sure, a few companies are working on trials.
But you won’t see a lot of WiMAX deployment anywhere outside of
third-world countries. Too little, too late, too costly.


Prediction: Voice over IP will
fade away.
Actual Results: Every year, I make
at least one prediction that is so completely wrong I don’t even
know what to say. This was one
of them.


Prediction: Cable companies
and phone companies will talk merger.
Actual Results: If the Comcast/Sprint
deal isn’t already underway when this hits the newsstands, it will
be a miracle. The major cable companies are flush with cash, and mid-range
phone companies need a video offering. But where does that leave Satellite


Prediction: PDAs will make a
Actual Results: The renewed interest
has put some zip back into the “Palm” brand, particularly
in PDA/Cell Phones. Treo’s 700-series smartphones are giving Microsoft
a run for its money, but Redmond is doing quite well with its PDA and
phone software, as well.


Prediction: Payroll software
will come down to three players.
Actual Results: The big story here
wasn’t the market domination of ADP, Intuit and Thomson, but rather
the number of software vendors who have re-discovered accountants as a
marketing channel. More than half of the vendors created or re-energized
their efforts to work with accountants rather than circumvent them. A
win-win all around.


Prediction: Color Laser printers
will become the rage.
Actual Results: With falling prices
and improved print quality, Epson and HP have led the pack in pushing
these ultra-printers into the retail channels. It’s now rare to
find an accounting office that doesn’t own one (or know where to
find one) for proposals and client financial plans.


Prediction: Disabilities will
take center stage again.
Actual Results: Just ask anyone
at Target, the retail giant that lost its court case in 2006 over disabled
access to its website. The
disabled community is increasingly vocal about not being left behind,
and the courts are beginning to take their side.


Prediction: Identity theft will
become an accounting issue.
Actual Results: It has become an
accounting issue, but not nearly to the degree that it could or should
have. Companies continue to manage data badly, and new reports of compromised
customer information arrive almost daily. Congress got sidetracked with
the elections, but this issue won’t go away anytime soon.


Prediction: The SOX compliance
business will collapse.
Actual Results: It didn’t
collapse, but neither has it turned into the bonanza that many accountants
thought it would be. Companies tightened their belts, bought the software,
got through much of the process and made plans to stay that way. Meanwhile,
other corporate misdeeds — like the HP espionage debacle —
stole the spotlight.



All told, a rating of 7.5 — the worst prediction record since we
began doing this column a decade ago. But with the elections over for now
and a new Congress itching to get busy, the year ahead promises to be both
more interesting and predictable. That said, here are our predictions for
the coming year.


2007 Predictions

Prediction: The
cable mergers will be in full swing. We hinted at this last year with
the discussions of mergers with phone companies. Keep in mind that the
biggest of the cable companies — Comcast, Cox and Time Warner —
are highly profitable with outstanding market caps and lots of cash to
spend. Some of that will go to shore up their telephony offerings by acquiring
cell phone companies (T-Mobile is quietly up for sale) or midsize phone
companies. And they’ll put acquisition money into programming and
customer service. But the real news will be the mergers among the cable
giants, as they try to reach equivalent size with AT&T/SBC/WorldCom/BellSouth.


Prediction: Monitor and TV prices
will continue to fall. Though technical problems with pixel burnout have
slowed sales of plasma units, LCD and other technologies continues to
show robust sales. The problem? There is so much competition that prices
are too low. The LCD market attempted to rally last year by charging more
for faster refresh rates (which yielded a slightly better picture), but
even that failed to stop the slide in prices. Good news for consumers,
though at some point there will need to be better technologies for large-screen


Prediction: PCs will still be
here. About once a week, I read yet another prediction of the death of
the personal computer. Here’s my prediction: The PC is here to stay.
We’ve already experimented with smaller sizes and smaller screens,
but consumers want more, not less. We make them more powerful and flexible,
finding new ways to use them (as with the rise of the media center server
over the past two years). Though there has been considerable consolidation
in the market for PCs, the number of units being sold each year is not
declining. So where’s the evidence that the PC is dying?


Prediction: Spam will get worse.
Much, much worse. There was a time when spam was the occupation of a handful
of unscrupulous people (most of whom, for reasons never explained, lived
in the state of Florida), and the United States was the spam king of the
world. But the passage of the Can Spam Act and some ruthless enforcement
has mostly shut those operations down. Today, the problem is that spam
and its related virus and phishing activities are now the domain of organized
crime. Run out of Asia and the former Soviet Union, using zombie servers
around the world, these crime gangs are pumping up the quantities of spam.
We’ll need new technologies to fight back.


Prediction: CRM will dominate
business software. Last year saw the first solid integrations of Customer
Relationship Management software with accounting software, enabling (through
integrations like Microsoft Dynamics GP’s CRM integrator) sales,
customer service and other facets of the organization to have access to
backoffice accounting data. But these are just the early stages of such
integration, and accountants should expect a flurry of other matchups
that reach from financial planning and payroll to fixed assets and inventory
control. If accounting software is the central nervous system of a company,
CRM is its lifeblood. It will be a case of more being better.


Prediction: Consumer electronics
will get easier. In its first two decades, the computing and personal
technology industry was dominated by aficionados, geeks and early adopters.
These were often purists who demanded the best possible performance but
had few concerns about appearance and form. Now that these electronics
— from home theater to Wi-Fi and on to iPods — are going mainstream,
manufacturers are becoming painfully aware that most consumers will sacrifice
some performance for ease of use. Where will it show up? Easier-to-use
music and video devices. Simpler remote controls. Larger TV screens. Built-in
surround sound amplifiers. Built-in cable boxes (which already exist in
card form, but have not been widely implemented). Life gets easier.


Prediction: Privacy will become
a “big thing.” As a rule of thumb, Democrats make a bigger
issue out of privacy. Last year’s flap over the federal government
tapping domestic phone calls came and went pretty quickly (though the
lawsuit continues). That won’t be the case in 2007. While the DOJ
is pushing to have the Internet data for all Americans kept available
for law enforcement use for at least two years, it is unlikely such a
law will be passed without a sizeable catfight in the Congress. The pendulum
is forever swinging, but this year it swings toward better privacy protection.


Prediction: Satellite broadband
will jump-start rural access. Getting Internet access away from large
towns has been a problem. Sure, the local cable company has in the past
two to three years brought some broadband, but only in town. The phone
companies can’t easily get DSL over the distances required. The
same is true with broadband over powerline, which seems to have a promising
premise that never manages to arrive. But an interesting set of things
happened last year. Satellite broadband (which has been saddled with high
prices and poor performance in the past) suddenly got acceptably inexpensive
and speedy. Sure, it still carries an installation cost of several hundred
dollars. And it still costs $60 to $80 per month. But 2007 will bring
a quiet rural revolution as we rev up more satellite installations (backlogged
at present in many parts of the country) to bring rural areas online.


Prediction: Vista (yawn!) will
finally arrive. The delays are just the beginning. Microsoft has set up
this newest operating system for a daunting debut. Two different (and
incompatible) versions. Better security, but not in most ways noticeable
to consumers and small businesses. Limited third-party support. A copyright
protection scheme designed to make consumers scream in outrage. Think
of it as a replay of all of the things that went wrong during the debut
of Windows 95. But at least it will have features attractive enough to
make people want to buy it, unlike the new version of Microsoft Office,
which promises to flounder through the next two years.


Prediction: Fiber will dominate
discussions on broadband. In the mid-Nineties, the cable and telephone
companies had to make decisions about whether to continue to deploy copper
networks or switch to fiber. They made the wrong call. At the beginning
of this century, both began the scramble to deploy fiber. Verizon leads
the pack with its FiOS system, followed closely by thousands of smaller
network developers. Cable is following a “fiber to the neighborhood”
strategy in an effort to hold down costs. But the reality is that the
battle to deploy fiber is the only broadband battle that matters. Those
who can offer fiber to the home will control cable, telephony, security,
video on demand and a host of other services. Those in second place will
have difficulty surviving.


And as always, much that will fall outside of the list of 10:

  • Wi-Fi wireless will continue to crash and burn, while broadband over cell
    phones will only grow with deployment of EVDO Revision A in 2007.
  • Internet speeds will continue to increase to feed demand for advanced applications.
  • Accounting software will continue its march toward dominance by Sage, Thomson
    and Microsoft. Smaller vendors who have hung on through the past two decades
    will slowly wind down as the applications get more sophisticated or simply
    move to the web.

    And we’ll be here to comment on it all throughout 2007.


Mr. McClure is a consultant and widely published writer on technology