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7/31/2013
04:40 PM
Rob Preston
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Hyper-Inflated Tech Stats Grow 217% Crazier

The tech industry is rife with over-the-top, groundless predictions and estimates. Try these on for size.

Every year we're treated to the baseless boast that "up to a billion people" -- one-seventh of the Earth's population -- watched the televised Academy Awards ceremony, even though this U.S.-centric event is lucky to draw a Nielsen-tabulated U.S. viewing audience of about 40 million. Where the other 960 million people are viewing from is anyone's guess. Perhaps Oscar pools are all the rage from Rangoon to Rio, but common sense suggests otherwise. Yet that billion-viewers number makes it into press coverage of the event annually.

Hollywood and its cheerleaders were never much for truth telling, but the IT industry is also prone to spreading its own statistical lies and damn lies, or at least presenting specious extrapolations and wild exaggerations as if they're fact. Several cases in point:

-- A group of computer hackers, four of them Russian and one Ukrainian, inflicted "hundreds of millions of dollars" in financial harm on more than a dozen major companies over several years, according to an indictment announced on July 25 by the Justice Department, which characterized the alleged criminal enterprise as the largest of its kind ever prosecuted in the U.S.

[ Do your managers trust Big Data? Read 6 Ways To Build Trust In Big Data. ]

While the feds cited a number of corporate victims -- 7-Eleven, Dow Jones, Euronet, Heartland Payment Systems, Hannaford, JCPenney, JetBlue, NASDAQ and Wet Seal among them -- they never did break down how they arrived at their multi-hundred-million-dollar cost estimate. They did, however, go out of their way to emphasize the Absolute Bigness of the information security threat in the most general terms.

"Those who have the expertise and the inclination to break into our computer networks threaten our economic well-being, our privacy and our national security," said U.S. attorney Paul J. Fishman in a statement. "And this case shows there is a real practical cost because these types of frauds increase the costs of doing business for every American consumer, every day. We cannot be too vigilant and we cannot be too careful."

As one commenter put it on The New York Times' online story about the indictment: "Prosecutors often make grand, wildly high estimates of damages in hacking cases. It's to convince judges that, if left free, the hacker will bring down the economy and end civilization as we know it." It's also to convince the taxpaying public to support government funding of these (generally worthwhile) cybersecurity efforts.

-- The Business Software Alliance's most recent Global Software Piracy Study estimates that such piracy cost ISVs $63.4 billion in 2011. Indeed, software piracy is a huge industry problem, particularly in poor countries. But you can't assume -- as the industry group BSA does -- that every time someone in China, Russia, Brazil or some other country illegally copies a version of Windows or Word that he's taking one or two hundred dollars out of Microsoft's pocket.

Much of that purloined software, even in developed countries where users can afford to pay for it, would never be purchased otherwise. It's impossible to say how much of it, but it's also misleading to suggest that the number of illegal downloads or copies multiplied by the market price of that software equals total industry losses.

-- General Electric estimates that the "Industrial Internet" -- its name for the world of interconnected, sensor-equipped, data-generating machines and other "objects" more commonly known as the Internet of Things -- will deliver as much as $15 trillion in economic value in the next 20 years. Cisco, perhaps having learned the lesson that round figures don't convey precision, puts that number at $14.4 trillion -- but it sees that economic value coming within just seven years, not 20.

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As contributor Art Wittmann notes in his excellent InformationWeek digital cover story on the Internet of Things, Cisco does break down its $14.4 trillion estimate, into the following buckets: $2.5 trillion in increased asset utilization, $2.5 trillion in increased employee productivity, $2.7 trillion in increased supply chain and logistics efficiency, $3.7 trillion in increased customer loyalty and thus spending, and a tidy $3 trillion lumped into the broad category of "innovation."

But such gargantuan numbers, projected out years and decades, can't be anything more than shots in the dark. To put those numbers into perspective, Wittmann notes that total U.S. GDP in 2011 was $14.9 trillion and the entire U.S. national debt is about $16.7 trillion. IoT isn't a market opportunity as much as it is an economic vision bordering on fantasy at this point in time.

-- Business Insider's BI Intelligence research arm engages in a bit of its own fantasy forecasting when it posits that Google Glass, the computerized eyewear Google is positioning for a variety of consumer and business applications, will generate $10.5 billion in sales by 2018. The product, by the way, isn't even out of beta yet; it's set for commercial rollout next year.

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jfeldman
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jfeldman,
User Rank: Strategist
8/6/2013 | 1:20:03 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
Good stuff. Charles Seife wrote a great book, "Proofiness," where he talks about the misuse of numbers, and the tendency of pundits and executives to ignore precision and margin of error, worth a read.
Reilly Kerr
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Reilly Kerr,
User Rank: Apprentice
8/2/2013 | 8:15:54 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
It's inappropriate to include current healthcare IT spending in anybody's forecasting survey. Their primary motivation to spend anything on IT these days is to meet ACA ("Obamacare") requirements for adopting and using EHRs (electronic health records) -- if they want Medicare/Medicaid reimbursement. Given the healthcare sector's 10-year or so lag in technology implementation, were it not for the ACA and the emergence of the BYOD workplace, the vast majority of healthcare IT spending would be on maintenance alone and mostly for admin and other back-office uses. The irony here is that changes in healthcare delivery brought on the full utilization of EHR technologies will first be appreciated by patients, thus making healthcare IT a market advantage. Once things settle a bit, IT and marketing will argue over who gets bragging rights. They'll both be wrong.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/1/2013 | 7:30:00 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
Social network usage deserve some scrutiny. Somehow I suspect that not all 955 million users of Facebook are really as active as the company suggests. And the same can probably be said for Google+.
TerryB
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TerryB,
User Rank: Ninja
8/1/2013 | 6:03:37 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
My favorite is the ROI projections when building a business case for an ERP implementation. Our company just had one very recently to justify putting in Dynamics AX in a business unit running on Access 2000 databases and a software system from 1990's still using Foxpro database which has been long out of support. You'd think that would be justification enough but, no, they predicted they would save $1 million in first year from inventory savings. And this in a company that makes superconductor wire to order for customers, they don't have any stock inventory. And even better, AX will save them $300K every year after! You gotta love it.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
8/1/2013 | 5:29:05 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
That one got me good, too.
OtherJimDonahue
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OtherJimDonahue,
User Rank: Apprentice
8/1/2013 | 5:22:15 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
A writer acquaintance of mine goes on the warpath every Oscar season over the "up to a billion people watch the Oscars" baloney. It is indeed completely baseless.

Jim Donahue
Managing Editor
InformationWeek
David F. Carr
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David F. Carr,
User Rank: Author
8/1/2013 | 5:05:12 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I always thought Facebook made a somewhat honest distinction between active users and the total # of registered users (including everyone who immediately forgot the password). But the stat is not without its own controversy http://dealbook.nytimes.com/20...
ANON1238069211759
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ANON1238069211759,
User Rank: Apprentice
8/1/2013 | 4:47:16 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I have often wondered about these hyper inflated projections myself. It is easy to jump on a bandwagon and see the "hockey stick" affect as the data is extrapolated out 10 or 20 years. I am often reminded of a funny movie (I forget which) in where a salesman has a chart of the popularity of disco music. "The popularity of disco music quadrupled between the years 1974 and 1976, if these trends continue....."
D. Henschen
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D. Henschen,
User Rank: Author
8/1/2013 | 4:44:29 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I propose a "Hypey" award, whereby forecasts are tracked and compared with actual results. This hasn't happened (as far as I know) because you have to wait three to five years to see if these things come true. But maybe we can track down some old forecasts and then give the "Hypey" award to the forecaster with the biggest misses.
Somedude8
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Somedude8,
User Rank: Ninja
8/1/2013 | 4:27:49 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
"Maybe those bots are gathering with the hundreds of millions of folks active on Google+ before watching the Academy Awards ceremony."
Almost sprayed soda on my monitor. One of the best lines from a tech article I have read.
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