Leading-edge technology trends.

• Author: Cohan, Peter S.
• Position: Technology

Since March 2000, a change in the way technology is financed has changed the way it is bought and sold--money for technology is not "free" anymore. With cash scarce, companies are looking to squeeze more performance out of lower IT budgets. Technology vendors that offer cost-cutting tools--like VolP, Linux and outsourcing firms--are taking a growing share of these dwindling budgets. This dynamic will produce the following 12 technology trends through 2004:

1 Convergence of cable and telecom industry services. After traveling different tracks, the paths of cable service providers and telecom carriers will intersect; both will vie for a common set of offerings that include video, voice and data.

2 Targeting digital advertising to consumers who are skilled at avoiding it. While digital technology continues to shape the music and film industries, major advertisers are adapting to changing customer behavior--such as young men, a key demographic, watching less television. Thus, advertisers are targeting messages to specific audiences by embracing new technologies such as TiVo and exploring advertising on video games and the Internet.

3 Shakeout among medium-sized software companies. A strong buyers' market and the push to on-demand computing threaten to drastically eliminate software firms that are neither large enough to weather the storm nor small enough to create a survival niche.

4 Pressure to squeeze higher performance from lower-cost IT infrastructure. With increased pressure to raise profits by cutting costs, companies will invest in cheaper technologies--like open-source software, blade servers and Voice-over-IP (VolP), in addition to outsourcing functions that others can do more efficiently.

5 China will continue to emerge as an important market for IT, but it must be approached cautiously. With its striving for technology leadership, China is becoming the world's second-largest high-technology market. While U.S. and European companies are eager to move into this market, China is not eager to share it. Multinational companies have lost initial leads in China by failing to understand the rules governing its marketplace. To make inroads, they must attempt to adjust to China's rules.

6 Spam avoidance as a major venture investment opportunity. Spammers generated $130 million in revenues in 2002 (including $20-$30 million in profit)--more money than the dozens of companies that have emerged to fight spam. The anti-spam industry has been...