2004 Predictions

With a new year start­ing, it’s time to jump back in the water and make a few pre­dic­tions as to what’s com­ing next. I sus­pect 2004 is going to be a big year in tech­nol­ogy and here are some pre­dic­tions for the com­ing year.

Apple

Apple will come out with a new lower-powered, lower-cost ver­sion of the iPod. The idea here is that they want to extend their lead in the dig­i­tal music space and use the iTunes music store as a lever­age for sell­ing more iPods. From there, I sus­pect they will intro­duce a new low-end iPod which will fol­low the exist­ing iPod line and offer less hard drive space at a lower price. In con­junc­tion with this announce­ment, they will intro­duce a new line of iPods that offer sup­port for both audio and video. From there, we might see a ten­ta­tive move into the dig­i­tal video space, with the pos­si­bil­ity of their extend­ing the offer­ing on the iTunes music store to include down­load­able music videos. Later on in the year, rumors will go uncofirmed as to whether Apple plans to intro­duce a down­load­able movies service.

Apple will also announce the release of a new class of lap­tops pow­ered by the G5 chip but offer­ing lower speeds than their desk­top coun­ter­parts, due to issues relat­ing with chip cooling.

Con­ver­gence: Music Stores

As more music store fol­low Apple’s lead, we will see at least one other site (prob­a­bly Wal-Mart’s) offer­ing down­load­able AAC files and fol­low Apple’s lead. On the other side, Apple will announce that it is solid­i­fy­ing its rela­tion­ship with AOL and offer­ing the iTunes music store as a com­po­nent of AOL.

The recog­ni­tion that the online music busi­ness is a low mar­gin one will force many play­ers to reassess their strat­egy, with con­sol­i­da­tion ensu­ing in that mar­ket and solid­i­fy­ing across two stan­dards: Win­dows Media Player files and AAC files.

Con­ver­gence: Voice over IP

2004 will be a big year for Voice over IP with many com­pa­nies offer­ing Inter­net tele­phony prod­ucts in both the small and medium busi­ness arena and the con­sumer one. As major tele­phone com­pa­nies unroll their offer­ing in that arena, thoughts will go to redefin­ing what a telecom­mu­ni­ca­tion com­pany is about and new con­sol­i­da­tion and splits will see phone com­pa­nies reor­ga­niz­ing around two busi­ness mod­els, either as util­ity providers, pro­vid­ing the infra­struc­ture (the hard­wired lines that go into a house or office), or as ser­vice cor­po­ra­tions, pro­vid­ing ser­vices that run over those lines (the voice tele­phone will begin to be thought of as a ser­vice instead of a utility).

By year end, there will be a lot of dis­cus­sion as to what those com­pa­nies are about and calls to reshape the reg­u­la­tory dia­logue on what a telecom­mu­ni­ca­tion infra­struc­ture is about. The other dis­cus­sion on reg­u­la­tion will go towards fig­ur­ing out how to deal with pric­ing mod­els on com­mu­ni­ca­tion ser­vices as the new ser­vices will destroy the con­cept of local and long distance.

Wire­less: WiFi phones and inte­gra­tion everywhere

A big sur­prise will be the rise of mobile phones that use Wire­less Inter­net con­nec­tiv­ity (Wi-Fi) and voice over IP to allow users to place calls using the Inter­net infrastructure.

Data ser­vices will become more promi­nent in mobile phones, led by camera-phones, which will increas­ingly be used for mul­ti­me­dia mes­sag­ing, and the intro­duc­tion of some video­phone ser­vices. As mobile phone com­pa­nies see more pres­sure on their voice ser­vices, due to the intro­duc­tion of WiFi phones and con­tin­ued pres­sure relat­ing to num­ber porta­bil­ity, they will look to data ser­vices as a new source of income.

Busi­ness: Revenge of the Inter­net companies

Inter­net busi­ness will be in the head­lines again as Inter­net com­pa­nies show they have built suc­cess­ful busi­ness mod­els based on profit instead of promise. As a result, investor con­fi­dence in Inter­net stock will return with an increase on stocks of com­pa­nies that show they can use tech­nol­ogy to lower costs and increase productivity.

In par­al­lel, ven­ture cap­i­tal­ists will start invest­ing in new tech­nol­ogy com­pa­nies. Much of the money that has stayed dor­mant for the last few years will be invested in new com­pa­nies that focus on ser­vices in the infra­struc­ture, secu­rity, and inter­con­nec­tiv­ity arenas.

Of course, the big ini­tial pub­lic offer­ing of the year will be Google, which will gen­er­ate enough excite­ment in the invest­ment com­mu­nity to have a coat­tail effect on other Inter­net stocks.

On the down­side of the invest­ment pic­ture, the stocks of Ama­zon, Ebay, and Yahoo will loose value as investors real­ize that their price/earning ratio are out of pro­por­tion com­pared to the rest of the mar­ket. Ama­zon will try stem­ming the losses in their share price by announc­ing that they are mov­ing to a new strat­egy: offer­ing a com­plete set of hosted ser­vices for retail­ers who want to lower their cost, instead of just being an online retailer on its own.

Busi­ness: Sun in trouble

Sun microsys­tems will see itself in a dif­fi­cult sit­u­a­tion as it finds itself squeezed on the lower end by Linux, which will con­tinue to eat Solaris’ mar­ket­shares, and on the higher end by Linux, which will increas­ingly be seen as the way to go when it comes to large scale appli­ca­tions. Com­pa­nies like IBM and HP will offer util­ity com­put­ing as a “bet­ter approach” for large scale appli­ca­tions, run­ning them on main­frames instead of large num­bers of blades.

On the edu­ca­tional end, Sun will lose mar­ket­shares to Apple, which will be push­ing its G5 and OSX plat­form as a bet­ter alternative.

In a dra­matic announce­ment to save the com­pany, Scott McNealy will announce that Sun will aban­don Solaris and move com­pletely to Linux by the end of 2005. The com­pany will also look to sell its SPARC proces­sor busi­ness, with either HP or IBM pick­ing it up, and announce that it is mov­ing to a new hard­ware archi­tec­ture, based on chips pro­duced by another company.

Devel­op­ment: Stan­dards at the forefront

Many large scale busi­nesses will real­ize the value of build­ing Inter­net appli­ca­tions on open stan­dards like XML, XHTML, and CSS. As a result, the redesign of many major cor­po­rate sites will sup­port those stan­dards and an increas­ing amount of time will be devoted to mak­ing web­sites more accessible.

RSS will also expe­ri­ence a major growth curve as more and more peo­ple become aware of the power offered by such a sub­scrip­tion model. Much dis­cus­sion will be paid to defin­ing busi­ness mod­els for deliv­ery of RSS with media orga­ni­za­tions try­ing to fig­ure out how to dis­trib­ute adver­tis­ing in their RSS feeds. Ini­tially, the Inter­net com­mu­nity will denounce the intro­duc­tion of ads in RSS feeds but will come to admit it as a nec­es­sary evil later on in the year.

Soci­ety: Social Net­works at the core

While ser­vices like Friend­ster, Tribe, Ryze, and pluggedin received a lot of cov­er­age in the tech sec­tor last year, many invest­ments in the sec­tor will fail as com­pa­nies just look at social net­work­ing as yet another fea­ture to add to their site. The exist­ing play­ers will either merge or be sold to com­pa­nies like AOL, Yahoo, or Microsoft, which will add social net­work­ing as another com­po­nent in their online prod­uct offerings.

Apple will be the sur­prise player in this new arena, using OSX as the basis for a new social net­work­ing plat­form that will merge their address book appli­ca­tion with mail, cal­en­dar­ing and chat ser­vices to pro­vide an end to end solu­tion on user’s desk­tops and offer added ser­vices through their .mac platform.

Pol­i­tics: Inter­net comes of age

Much of the US pres­i­den­tial cam­paign will be using the Inter­net as a polit­i­cal tool to orga­nize sup­port­ers and raise funds. The early lead taken by Ver­mont Sen­a­tor and democ­rac­tic pres­i­den­tial can­di­date Howard Dean will help him win his party’s nom­i­na­tion. Using the same tools dur­ing the gen­eral elec­tion, Dean will try to ignite the gen­eral demo­c­ra­tic base in a fight against George Bush. The Repub­li­can party will enter the elec­tion sea­son with a sim­i­lar set of tools and much of the cam­paign will be fought online with some poten­tial scan­dal aris­ing out of one of the candidate’s site being hacked. As a result of the Inter­net bat­tle, record num­bers of vot­ers will show up at the polls in November.

Of course, TNL.net will con­tinue report­ing on all this and show how wrong all those pre­dic­tions were at the end of year.