What Comes After Recovery



I know, I know, it’s tough to talk about good times right now – what with the Dow still on the down escalator, the banking industry looking more screwed up than ever, and both Congress and the Administration managing to find new ways to impede the natural healing process of the economy.

But we will come out of this disaster – though my cheery prediction of this summer (when it should have happened) has begun to fade in the face all of the counterintuitive Fed ‘solutions’ before us – and when we do, it will be a whole new game out there, with new opponents and new battlefields.


What will be the biggest competitive fights of the post-crash tech business world?


I can see four shaping up already.


The first – and biggest, revenue-wise – fight will be for control of the world’s data centers. This will be between Hewlett-Packard, Cisco Systems and IBM. . .and the first salvo came this week with rumors that IBM was negotiating to buy the also-ran in this race – the long-suffering Sun Microsystems – and put that company out of its misery.


This is a trillion dollar market, and the fight will be between some of our biggest corporate heavyweights, so this contest is going to feature some heavy punching, global battlefields and no doubt appeals by the losers for Federal anti-trust investigations into the winner.


And who will the winner be? Hard to tell. Cisco has the industry creds, HP has the muscle and the broadest tech capabilities and IBM has the best access to corporate C-level officers – and is about to beef up its hardware with Sun Micro. Expect this duke-out to last the better part of a decade.


The second battle will be over the control of revenue-generating information. Right now, the clear industry winner is Google, which, in a brilliant stealth campaign, offered the world a free Internet search engine . . .and in exchange took much of the world’s advertising revenues.


The rest of the world has now caught on to that bait-and-switch, but not before it is almost too late. The race now will be to nail down the world’s last remaining information caches – and if possible, create new ones – before Google snatches them up, as it did with YouTube. That’s what Microsoft is trying to do, and you can be sure that was Carol Bartz’s primary charter when she was hired to bail out Yahoo! That’s where Twitter is going too, despite the widespread notion that the company has no revenue model. And, perhaps it goes without saying, that’s exactly what Mark Zuckerberg is trying to do with all of those controversial schemes at Facebook to monetize user information.


What we can expect to see then, over the next few years, is an Information Land Rush, with companies snatching up every unclaimed pile of information on the planet (and beyond: consider Google Space), spending huge bucks to create new ones – and then building sturdy legal, software and security walls around them.


Is it too late to stop Google. It may seem so right now. But Google is suffering serious growth pains that it may yet not overcome. And though it may not seem the case, there remains more information on the Web not controlled by Google than under its hegemony. In the end, it may prove to be the case that no one defeats Google head-on (though Microsoft and Yahoo will continue to try), but that other, equally powerful new companies spring up alongside it.


The third battle is well underway. It is for control of the Third Screen – i.e., smartphones. The ultimate size of this market – especially when you consider that two billion people in the developing world are saving their truly hard-earned money to be part of it – is almost beyond imagination. Certainly trillions, maybe even tens of trillions, of dollars. This is actually two battles, as is often the case in tech – one hardware, the other software.


You already know about the hardware battle: Apple, Palm, Blackberry, Nokia, Motorola, etc. Apple, with the brilliant iPhone, took the early lead, but you can’t discount the sheer manufacturing power of the Big Boys of Cell. This week’s iPhone 3.0 announcement already suggests that the as-yet unshipped Palm Pre already has Apple nervous.


The software battle is at least as interesting. Here again, Apple took an impressive early lead, thanks to the usual superb user interface on the iPhone and brilliant tactical move of the Apple App Store, which now offers 25,000 iPhone applications created by third-party developers – a number which is doubling every two months. In an economy where most entrpreneurship is punished by the government or unable to find venture funding, designing iPhone apps has become the hottest new form of start-up business.


But waiting in the wings is Google and its new Android smartphone operating system. Apple’s biggest flaw, especially under the otherwise brilliant leadership of Steve Jobs, is that it will almost always choose a controlled minority market share over an uncontrolled majority share. That’s how the company lost the personal business to Microsoft, despite having superior products. And despite an admirable openness about iPhone apps, there is already some grumbling out there amongst developers about Apple’s heavy-handed tactics.


With the open-systems Android, Google is trying to do another Microsoft to Apple, this time in the smartphone business – and, as always, capture yet another vast information cache in the process. Is it too late? Hardly. For all of the iPhone’s success, it has still only capture a tiny fraction of the potential world smartphone market. This battle has just begun to skirmish, and will last a generation. Google is betting that a couple dozen giant phone makers will prove to be more clever than a couple dozen product designers at Apple.


History hasn’t shown that to be necessarily true – but has proven that, given Apple’s core philosophy, those score or more phone companies will eventually produce products that are nearly as good and a whole lot cheaper . . .and in the developing world, that price differential will prove decisive.


The fourth battle has just begun. Just yesterday [Scott: Thursday], Sony, currently the forgotten second player in the emerging e-Book industry, announced that it has entered a deal with Google to make the half-million copyright-free books — that Google has been busily digitizing at the world’s great university libraries – available on its Reader e-Book.


That’s a whole lot more than the 250,000 books that Amazon currently has available in its Kindle library – but then, the Google Library Project books all have to have been published before 1923. This means that, essentially, Amazon now controls the world’s new ideas, while Sony owns Mankind’s memory.


This fight is only going to get more intense, as the two companies fight for every book they can get their hands on. I also suspect that we will see several other new e-Books appear on the market in the months to come, creating a welcome price/performance race.


Meanwhile, this can only be good news for authors, book publishers, magazine editors and, as I suggested last week, even newspapers. Those same who authors complained bitterly about Google snatching up out-of-print books may soon wish they had been a lot more receptive to the idea, especially when the e-Book companies, working with publishers, start getting into a royalties war.


All of that will be a welcome injection of excitement into the currently stalled tech world. But for me, what is most exciting is the knowledge that, between e-Books, smart phones, cheaper and more ubiquitous data centers, and even greater access to the world’s information stores, it will soon be possible for even the poorest people in the world to join in the global marketplace, obtain any level of education they desire, and have access to the investment capital they need to realize their dreams.


Put all of those things together and, as dire as matters seem right now, we may well be on the brink of the greatest explosion in intellectual capital – new ideas, new inventions, new lifestyles, new institutions, new discoveries, new products and services – than the world has ever seen.


All we need to do is get out of our current doldrums and get back into the fight.