Cheer Up, Silicon Valley

I am hesitant to write this article as so many smart people have opined on this topic of the future of the IT industry. Larry Ellison raised quite a stir by his recent comments about “the end of Silicon Valley as we know it” and its implications for IT companies. The venerable New York Times Magazine has declared that IT is a “maturing” industry and even goes so far as to sugges that the IT industry might go the way of the railroad (click here for the full article). I don’t necessarily agree with the conclusions that the authors reach, but there are some good lessons to be learned here.

Face It — Information Technology is a Maturing Industry — Let’s not kid ourselves; information technology is a maturing industry. When was the last time you eagerly awaited the latest chip release from Intel? How excited were you about all of the breakthrough new features in a Windows or MS Office release? How likely are you to exhaust the disk storage capacity in your current computer? The reality is that the tech industry has done a good job of improving the core pieces of the IT infrastructure (operating systems, semiconductors, and communications) to the point where they are adequate for most applications at the moment. Most of the sizzle in information technology is not happening at “the core” at the moment. I am not bold enough to suggest that this will be the case forever — just look at how Wi-Fi has reignited interested in wireless semiconductor investment and innovation.

IT is not dying — it’s just the nature of the dialog that is changing — I happen to actually agree with the tone of the NYT Magazine article. In both the consumer (not mentioned) and enterprise (mentioned) sectors, the age-old “technology for technology’s sake” justification for upgrades and purchases seem to be giving way to the logic of what I call “technology for applications’ sake”, or an environment where applications and application enablment trump raw technology progress. I would be willing to bet that integrated Wi-Fi will have as much to do with driving laptop computer sales as any Microsoft OS update will. Businesses and consumer increasingly what to know why they should invest in new technology — the “new new thing” argument is not going to cut it for everyone anymore.

Don’t confuse technical accomplishment with technical adoption — Most importantly, there is a huge difference between technical accomplishment and technical adoption. Inventing electricity is a technical accomplishment. Wiring the United States with electricity to the home is adoption. The development of computer internetworking was a technical accomplishment. Networking the world is technical adoption. In almost all cases, the adoption portion of the cycle is 1) much longer in duration than the accomplishment phase and 2) creates many opportunities for significant wealth creation and innovation.

Think about some of the hottest buzzwords in IT today. Utility computing. Wireless. Virtualization. Home Networking. In each case, we have finally crossed the “technical accomplishment” hurdle and are staring down the face of some very significant technology adoption challenges.

So, what does this mean for the valley? In my opinion, Larry Ellison is right in some ways. For Silicon Valley to continue as a dominant technology center, we as a region are going to have to get more interested in the technology adoption portion of the curve. There will continue to be opportunities for technology accomplishment to create significant value in IT, but the larger opportunity going forward is going to be in the adoption business.