Down To Business: Buy, Sell, Or Hold These Tech Movements?

For more than a decade, Gartner has chronicled the "hype cycle" associated with various new technologies--from the breakthrough or "trigger" phase to "peak of inflated expectations" to "trough of disillusionment" to "slope of enlightenment" and finally "plateau of productivity." Clever stuff, but since technology is an investment, let's instead apply the stock analyst's more straightforward buy, hold, and sell ratings to some of the hottest tech movements of the day. Let us know where you're bullish and bearish.

SERVER VIRTUALIZATION Creating multiple self-contained application environments on a single physical server promises to cut hardware, system maintenance, and data center costs and improve security and continuity planning. Suddenly, every tech vendor has a virtualization play. Evidence suggests, however, that the adoption curve for virtualization hasn't flattened just yet. Revenue at VMware, the technology's marquee vendor, has risen progressively faster over the past five quarters, defying the law that as large software companies get larger (it's on an annual run rate of $900 million), they do so at a slower rate. In a recent InformationWeek survey, 65% of business technology execs said they're already deploying virtualization, and another 24% plan to do so. This is one technology movement that's living up to the hype. Buy.

SERVICE-ORIENTED ARCHITECTURE While virtualization can yield almost immediate returns, SOA is a long-haul investment. Turning monolithic, inflexible applications into hundreds of lightweight ones that can be shared across departments requires intense, ongoing business technology collaboration. It's why only 7% of the respondents to a recent InformationWeek survey said their SOA implementations exceeded company expectations. Hold.

OFFSHORE OUTSOURCING Beware the simplistic analysis. On one end of the hype curve is Deloitte, which argues in a report that if banks were to adopt "best practices" in offshoring, the industry could cut its annual IT cost base by up to $16 billion. Deloitte predicts that by 2010, 30% of the banking industry's IT spending will be handled offshore, compared with 6% today. No mention, however, of the massive disruption and disillusionment such a shift would cause, as if shipping another $11 billion in spending (and related jobs) abroad has no wider ramifications.

On the other end of the curve is renowned economist Alan Blinder, who argues that as many as 40 million American professional services jobs are at risk. Blinder assumes that just because a job can be offshored, it will be; that jobs sent offshore rarely return (they often do); and that relatively few U.S. jobs are actually created from increased exports of services. Hold.

SOFTWARE AS A SERVICE The SaaS model burst onto the scene in the late 1990s as hundreds of niche application service providers, or ASPs, targeted small and midsize customers. Over the years, poor service performance, complicated pricing, lack of customization--and the dot-com demise--thinned the herd to just a handful of providers.

Today, the subscription software model has matured, moving beyond small customers to big ones like Cisco Systems, DuPont, and Merrill Lynch. Even the big license vendors are scrambling aboard. In a recent InformationWeek survey, 40% of respondents said their organization is using or plans to use SaaS for one or more applications, and 23% said it's under consideration. More than half of those responses came from companies with $100 million-plus in revenue. Buy.

RADIO FREQUENCY IDENTIFICATION If ever there was a technology defined by hyperbole, it's RFID. When it rose to prominence seven years ago, it promised to transform industries and threatened to stalk our every move. Today, it remains a niche, held back by cost, radio interference, and inertia. Still, businesses such as Wal-Mart and Kimberly-Clark are seeing returns on RFID investments that are focused on specific problems and don't have to involve multiple partners. Hold.

Rob Preston,
VP/Editor In Chief
[email protected]

To find out more about Rob Preston, please visit his page.