November 03, 2008, 6:27 AM — We live in interesting economic times. I could also say that we live in interesting technological times but that is always true so it doesn't need to be explicitly spelled out. The worlds of economics and technology are deeply inter-twingled of course and getting more so with every passing year.
Some quick examples. Tech is a key driver for productivity growth. Tech is a barometer for consumer spending. Tech is the substrate that makes today's realtime trading of insanely complex financial instruments possible. Tech is the substrate that enables today's realtime media industries to function. Thus, tech enables media saturation which drives market sentiment which drives economic trends which, in turn drives tech...All very inter-twingled.
At a mundane level, changing economic fortunes tend to influence technology acquisition funding strategies. Do you choose to acquire tech via purchase or lease or rent? The choice of which way to go has many factors but economic sentiment is certainly one of them. Essentially, do you want to tie up capital upfront or spread it out (at some additional capital cost)?
Now, add to that classic thought process the fact that we live in incredibly volatile times from a technology perspective. Do you really want to own that gadget/box/application? What will its depreciation curve look like given how rapidly the industry is moving? How long will it be before you see the dreaded "End Of Life" notes on the web pages associated with the products you buy today? How long before disk replaces tape? How long before solid state memory replaces disk? How long before VGA devices are legacy? USB? At a software level, how long before your OS becomes a "compatibility mode" of some other OS? How long before your file formats require lossy "file-import" into some new generation application?
Tech companies are responding to tough economic times in interesting ways. We are seeing more emphasis on pay-per-use economic models for hardware and software alike. Not just in the "cloud" but also in scenarios in which the hardware/software sits on your premises.
Hardware that includes a consumable element, for example, printers, is dropping significantly in cost to the point where they are effectively pay-per-use devices. open source software - some would argue - is effectively pay-per-use as businesses can get the software for free but pay-per-use for risk mitigation, services and support.
With the complexity and volatility of the tech space showing no signs of abating, we are at an interesting juncture I think. Will the combination of economic necessity, tech volatility and emerging tech business models drive the world further away from capital expenditure and in to the expense account when it comes to tech acquisition? Will we see the day when actually "buying" a computer or an application is less common than renting one? will we see the day when software on your premises that you own outright is unusual because most downloaded software "phones home" to meter your usage and charge you accordingly?
The volatility of tech remains constant- through good economic times and bad. Add in the current economic turmoil and you have a "perfect storm" forming around the capex column. Given the deep inter-twinglements between economics and tech, only a weather forecaster would be brave enough to predict where this storm will take us.