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Tech Business Outlook for 2003

December 2002 Corporate

Year in Review

Last year was at best a mediocre business environment. Using the consumer confidence index, business spending indices, and stock market indices as a guide, we can predict that next year will present us with a slow recovery at best. Given this outlook, it might be tempting to keep our heads in the sand and try to wait it out. That would be a pity.

Despite the poor economic climate, many companies were able to produce both revenue and profit growth in 2002. At the Fortune 1000 end, Cannon outshined its Japanese competitors in delivering both revenue and profits to its shareholders despite a decade of little to no GDP growth. In the mid sized area, SPL WorldGroup reported increasing their revenue 15% to $100 million. Even for small companies, firms like Taratec were able to dramatically increase the scope of their operations. We too can do the same in our own businesses.

Delivering growth is not impossible despite bad economic environments. It requires a sound marketing strategy built on customer and market data implemented efficiently with a clear market message. Broad industry trends are a part of this marketing strategy. To this effort, I would like to provide my predictions of bright spots in next year’s tech markets.

Expecting the Bright Spots

High-level analytics will continue to penetrate the market. Companies are seeking better methods to understand, analyze, and interpret their data. Using past investments in information technology as a platform, many companies are now turning to high-level analytics to mine their data. Trends analysis of customer data, manufacturing operation data, and portfolio data are some of the demand thrusts of the market. The pharmaceutical and radiology market demonstrate a growing demand to analyze large quantities of text and image data in order to uncover hidden patterns. Firms heavy with PhDs in hard sciences are well poised to provide products and services to meet these growing markets.

Health care oriented software, services, and hardware is another bright spot in the market. There are three significant demand drivers for software and automation in the healthcare market. First, HIPAA is being implemented and laggard firms still need help with this new piece of legislation. Second, aging Baby Boomers are driving up the overall demand for healthcare and hospice care. As the demand for healthcare services increase, so too will the demand for business applications and hardware. Third, despite the HMO’s approach to cost cutting, healthcare in the US still consumes 30% more of our GDP than in other developed nations while leaving an increasing number of us without insurance. Expect the health insurers and health maintenance organizations to express high interest in goods and services that can reduce their cost structures.

Embedded systems and software that enables companies to get more from their investments in embedded systems also offer a bright spot in the market. Whether the embedded system is in consumer products, manufacturing plants, vehicles, or utility generation and distribution assets, the market continues to express a demand for physical objects to become more intelligent. As we continue to embed processors, memory, and drivers into physical objects, the demand for systems to collect, store, and manage that data will increase. In the embedded system market, specialized hardware engineers and software firms have the potential to reap profits.

The large business applications of ERP, CRM, and SCM will continue to be sold, but at a slower pace than in the past. These markets are maturing. The bright spot here is in providing upgrades, add-on modules, and after-market support. While not being as sizable as a consulting effort to install SAP at British Petroleum, firms able to provide capable staff at a low price will be able to participate in a number of transactions.

Lastly, while outside of the realm of information technology, Nanotechnology is poised to receive serious attention in 2003. Nanobots are still too developmental, but nanotech applied to medical solutions are closer to market. Currently, materials based nanotechnology has meaningfully entered industry applications and is demonstrating its value. Venture capital should be forthcoming in brining this potential revolution to market.

Embracing our Future

We can see from the above examples that the entire tech industry is not imploding. In many industries and at all levels, opportunities for profitable growth exist. We should demand from ourselves the ability to uncover opportunities, clarify them, and move them forward to booked revenue. In doing so, we will be embracing our future.



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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