Technology Predictions - TMT Trends 2008 - Part 1

Foreword

Welcome to the 2008 edition of the DTT Global TMT Industry Group's Technology Predictions.

As predicted in last year's Technology report, the environment has become increasingly important to all of the activities of technology companies, from the greenness of products and services through to the sustainability of production processes. The user interface has also taken center stage, in all parts of the technology sector. Storage, and its cost, became a sensitive issue, with research suggesting that the volume of data created during the year would approach the total amount of storage available1. Biometric technologies continued to make progress, and were included in a growing range of products, from laptops to smart phones. Free offers in the technology sector continued to represent a double-edged sword, and in some markets, free services such as VoIP began to struggle. Carousel fraud continued to frustrate law enforcement agencies and technology companies alike, as gray markets continued to thrive. New combinations of existing technologies made a strong show, as suggested. Social networking continued to provide strong growth, and technology companies played their part in trying to monetize such services. Parasitic power systems made steady progress, though mostly on the margins of the sector. And the bionic human has marched - and run - steadily forward.

The outlook for the technology sector in 2008 is similarly varied. In this year's Predictions: virtualization of the enterprise working environment is likely to make steady gains, although companies are likely to question its panacea status. A greater skills shortage may emerge, sometimes as a result of erstwhile legacy technologies being viewed as the future. LED technology may start to supersede the incandescent light-bulb. The image of nanotechnology may be enhanced through a growing awareness of its ability to better the environment. The ability to be anonymous on the Internet may decline as users, traders and regulators call for more widespread authentication of users' identities. Earning revenues from PCs may become less about selling equipment and more about selling services, particularly for data protection. Privacy may become a key selling point for many online businesses. XBRL, a new reporting language for corporations may well become increasingly widespread. A digital divide separating advanced digital users and their own data may deepen, due to incompatible standards. And finally, all the while, man's most precious resource - water - is likely to become ever more scarce.

I am often asked how the DTT TMT Global Industry Group's Predictions differ from the many similarly titled reports produced by other organizations. I believe Predictions has a unique combination of objectives and methodology.

The Predictions series has been designed to provide a diverse selection of views and thoughts that challenge, inform and engage industry leaders and executives. It neither aims, nor claims to be a comprehensive forecast of every anticipated event. Its aim is to provide a point of view, but by the very nature of predictions, the outcome may differ from what was originally expected.

The inherent unpredictability of the global technology sector can be mitigated by having a robust methodology that synthesizes multiple sources of information and a wide body of opinions that require thorough peer reviews. The 2008 series of Predictions has drawn on internal and external inputs from conversations with member firm clients, contributions from DTT member firms' 6,000 partners and managers specializing in TMT, and discussions with industry analysts. As last year, Predictions for the technology sector has been able to draw upon the insight gleaned from a series of 20 interviews with leading executives from around the world on the key industry theme of digitization. These interviews have been published in a book, Digital Dilemmas, available online (www.deloitte.com/tmt).

I hope the result of our endeavors provides you with plenty of food for thought for the year ahead. On behalf of DTT's Global TMT Industry Group, may I take this opportunity to wish you all the best for an enjoyable 2008.

Igal Brightman

Global Managing Partner

Technology, Media & Telecommunications

Executive summary

Virtualization was one of the most talked about technologies of 2007. In 2008, enterprises may ask more probing questions about the limits, as well as the potential, of virtualization, possibly leading to a more measured deployment of the technology. This should benefit companies and suppliers alike. Principal questions that IT departments might ask concern the timing, robustness of security and cost of ownership. While virtualization is still likely to be the future for many parts of a company's IT environment, a cautious, longer term view may replace the haste of the recent past. Companies may also ask themselves how will it change the way we work; how will we manage it; which business objectives would virtualization address and which problems could it solve? Full costbenefit analyses should even consider factors such as the potential impacts of virtualization on tax planning.

Just 10 years ago, the consensus was that the mainframe was doomed to extinction. Yet, over the past few years mainframes have been going from strength to strength. In 2008, this trend seems set to continue. The installed base of mainframes is rising at about 5 percent a year. Every day in 2008, mainframes are expected to process more than 30 billion transactions, representing 70 percent of the world's business data. While the mainframe has proven to be resilient, the workforce appears not to be. In 2008, while the importance of mainframes may rise, the number of staff skilled in their maintenance and development may fall. What used to be regarded as legacy may then, as has happened with mainframe computers, become viewed as the way of the future. Enterprises, as well as the industry that supplies them, should review their long-term talent requirements regularly. There are several potential approaches for dealing with talent scarcity. One would be to migrate applications away from a platform with a skills pool that appears to be poor. But this is not always feasible. A second approach would be to train staff. A third approach could to be to make the underlying technology easier to use.

The conventional, highly inefficient, incandescent light bulb may finally start to be superseded by the white LED in 2008. The conventional light bulb represents as much as 25 percent of a typical household's yearly power bill. The luminous efficiency (the ratio of light output to power input) of the traditional light bulb is, at best, 2.6 percent. Current LEDs boast a luminous efficiency of up to 10 percent; next generation models offer up to 22 percent. In 2008, the LED should become commercially viable and its challenges with regard to intensity and color should have been resolved. Given that the LED is a semiconductor technology, it should benefit from Moore's Law, with manufacturing costs expected to decline by 50 percent every 18 months. The semiconductor industry should improve its LED technology, especially since it is one of the few highgrowth areas in the sector at present. Governments should consider subsidizing LED purchases with rebates or tax deductions.

The public image of nanotechnology has recently become tainted, despite mass market use of nanotechnology-enabled products. People are concerned about the possible malign consequences of the release, accidental or otherwise, of engineered nanoparticles into the environment. Along with the growing distrust of nanotechnology there has been a steady rise in concern over the environment; nanotechnology could have an important role to play in healing, rather than harming the planet. Therefore in 2008, the public's demonization of nanotechnology could be reversed, and a green-tinged halo could replace its horns. Nanotechnology is already being used to address several environmental issues: generating clean power, reducing existing power consumption, providing drinkable water, cleaning contaminated land, reducing harmful emissions and enabling long-life portable power. While the industry should explain where nanotechnology has made a positive difference, it should be wary of succumbing to hype or overpromising. The sector should always bear in mind that, as with any emerging technology, adoption is always going to be an economic decision, whether for private consumers or for businesses.

It is often argued that one of the great benefits of the Web is anonymity. Contributions to the Internet, whether in the form of blogs, comments on products, video uploads, dialog within chat rooms and contributions to online encyclopedias, can all be made under aliases. In some respects this could be viewed as an extension of freedom of speech. But anonymity can give rise to abuses. In 2008, there is likely to be an increasing clamor, from regulators, users and online traders, for the Internet to require people to provide authenticated identity every time they make any transaction. A move to online authentication, while initially being regarded as an affront to liberty by some, could ultimately be good for business and for users. For example, bolstering consumer confidence in e-commerce, online auctions, Internet chatrooms and other transactional websites should help sustain growth, suppressing fears about the growing volumes of online fraud and other malign behavior. The industry should, however, bear in mind that full authenticity is unlikely; as in the real world, those who really want to remain anonymous are likely to be able to do so.

Since the launch of the first PC, the volume of and, more critically, the value of data stored on computers has grown exponentially. Credit card information, address books, clients' business plans and paid-for MP3 tracks may all be...