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The Next Big Thing

By Eric Nee  |  Posted 11-11-2002 Print

Of course, there is always the potential "Next Big Thing"—a technology that no one can predict and no one can ignore. Yet even if it comes along, CEOs will be much more cautious about how they invest their money after the billions of dollars that were wasted on superfluous Internet projects in the past few years.

The impact of such a long-term slowdown in IT spending will be widespread. We are already getting a glimpse of what it might be in the current economic slowdown. Venture capital money is already slowing dramatically, and will continue to erode if it becomes clear that IT spending will permanently slow. Less venture capital means fewer startups—and less innovation.

Slower growth also means greater competition among IT vendors. This is already evident in lower prices and slimmer profit margins among IT vendors. Lower prices are certainly good news for CIOs, but slimmer profit margins will mean less money available for research and development. "More companies will turn to the Dell model," says Anderson. With R&D money cut back, technical breakthroughs will be harder to come by.

If IT becomes a slow-growth industry, it will also become more difficult for IT vendors and CIOs to attract talented people. Talent migrates to where the money and the action are, and the talent will quickly move elsewhere.

The end result? The IT industry could start looking a lot like the automobile industry, a large and important business, but not one known for growth or innovation. This was bound to happen sometime, but it is looking like the time may arrive a lot sooner than many people expected.

Eric Nee, a longtime observer of Silicon Valley, has served in a variety of editorial positions at Forbes, Fortune and Upside magazines. His next column will appear in January.


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