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Tech predictions for 2004

Tea leaves and crystal balls offer glimpse of the year ahead

By Eric Hellweg
Business 2.0

Tea leaves and crystal balls offer glimpse of the year ahead

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• Business 2.0: The Year in review external link
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• Business 2.0: Digital music external link
• Business 2.0: Major record labels  external link
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Digital Music
Voice-over-Internet protocol
TiVo Incorporated

(BUSINESS 2.0) -- A new day, a new year, a fresh white snowdrift we can turn into snowmen or slush. That's right, it's time once again for my annual look at what's ahead for the new year in the world of technology and business.

Before we raise the curtain, however, let's look back at how I fared with my predictions for 2003. I'm proud to announce that I hit even better than a combined Alex Rodriguez and Manny Ramirez, getting three out of my four predictions correct. I forecast an up year for the market -- complete with mini tech bubbles -- and that notebook computers would continue their torrid sales pace, stealing market share from desktops (IDC's third-quarter 2003 numbers show notebooks with a 40 percent share of the U.S. computer market, up from 25 percent in the third quarter of 2002).

I also correctly predicted that Blockbuster would have a rough year. Viacom (Blockbuster's parent company) reportedly is trying to sell the company but is having a hard time finding buyers.

What did I get wrong? I said that both TiVo and Sonicblue would go bye-bye, unable to withstand the continued encroachment by cable companies offering personal video recorder functionality in their digital cable boxes. Hmm ... maybe that will happen this year?

But enough with the past! Herewith, my predictions for 2004:

DIGITAL MUSIC SHAKEOUT. Starting in late 2003, the must-have fashion accessory has been a music-download service appended to a company's existing site (or a new stand-alone service). Everyone from Gibson Guitar to PepsiCo to Wal-Mart has announced that they are getting into music downloads in one form or another. The only companies seeing any bottom-line money in any of this are the record labels themselves and companies such as Apple, which can also upsell margin-heavy hardware. As a result, I think we'll see most of the new music sites either shut their doors or consolidate in 2004. The only wild card in this prediction: If the music industry renegotiates its royalty and licensing fees, the download services could actually start turning a profit. Don't count on that, however.

OFFSHORE OUTSOURCING BECOMES AN ELECTION ISSUE. The United States is entering uncharted territory, with white-collar technology jobs disappearing from our shores at a rapid clip and reappearing in India, China, and Southeast Asia. Remember the cries lamenting the educational disparity between our schools and those in other countries? It seems that those concerns are finally coming home to roost. Look for offshore outsourcing to become as big an issue in November as the relocation of manufacturing jobs was in the 1970s and '80s.

NASDAQ: 2,500. Did I just say that? Yes, I did. And Google will lead the way.

VOIP TAKES OFF. Voice-over-Internet protocol finally made a splash in 2003, after the technology had baked for the last eight years or so. It's still in the early-adopter phase, but with December announcements by AT&T, Qwest Communications, and Time Warner Cable (part of CNN's parent company Time Warner Inc.) that they're looking to roll out the technology, VOIP will really hit its stride in 2004. The monoliths moving into the market should lift all boats, including smaller, pioneering firms such as 8x8 and Vonage. Though consumers will migrate to the services at a steady clip, corporations will lead the way, stampeding as they upgrade their older telecommunications infrastructures to the cost-saving VOIP.

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