The IT sky is falling!

Things are looking a little dire out in tech land. At least, if you’re looking at it from the perspective of the stock markets. As most will know, the tech-heavy NASDAQ has been trading at under 2000 for a while now, still trying to find its bottom after a mostly downward ride from 5000 last year.

A large part of this has been the “popping” of the Internet bubble. For the last few years, it had been perfectly OK for a company to lose lots of money, and have no prospects for making any anytime soon, so long as they were involved with the Internet, or some other sexy technology.

The “new economy” it was called. And then it crashed. A slow down in the European market was blamed at first. Then a general softness in the IT marketplace. It seemed consumers just weren’t interested in upgrading all their hardware every eighteen months like the manufacturers were hoping.

Whether this is good or bad depends on your point of view. Investors are smarting, of course, but smart long term players will be buying up the depressed stocks of solid companies, waiting for the enviable up turn. Double and triple digit growth rates aren’t likely to return, but comfortable and sustainable growth is sure to.

On the other hand, for consumers of IT this correction is an opportunity. There’s a lot of “kit” in the supply channels, which means dropping prices across the board. Manufacturers to over-estimated demand must sell their existing stocks before they can introduce the next generation of products.

Intel and AMD continue to battle it out, with price drops and faster processors being announced every few weeks. Currently available are Intel P4’s running at up to 1.5 Gigahertz. 1.7 GHz versions are expected mid April, with a 2 GHz part available Q3. Not to be out done, AMD have parts available at up to 1.3 GHz, with faster versions expected shortly. In some cases, AMD chips can out perform faster versions of the P4.

Similar trends continue in most areas. Memory pricing is at an all-time low, with only slight increases expected for the next while. Hard drives and display devices, even PDAs, continue to increase in ability while dropping in price.

Almost makes one want to run out and upgrade. Except… What most people have on their desks is already good enough. If it works, why dump more money into a system? Consumers, and IT departments, are realizing that rather than upgrading a whole system, just adding more memory or a bigger hard drive is often all that’s really required.

From the perspective of the manufacturers, this is a big part of the problem. They’ve already saturated the market with computer equipment, with most businesses and more than 50% of all North American homes owning computers. If this market refuses to retire their old equipment, what can a manufacturer do other than lower prices and forecasts?

The soft market for computers is expected to continue for some time. Many people question if desktop PCs will ever again have the same demand, suggesting PDAs and mobile computing may replace them for most applications.

There is little question computing will continue to be important to industry and personal communications. Embedded and pervasive computing will only increase this. This correction has simply been a wake-up call for IT companies that they need to bring something new and useful to the table.

The graphical Web browser was the last “killer app” the computing industry has seen. Since then, the industry has provided very little that’s new, other than bigger and faster devices which most people don’t have the applications to even take advantage of. Until the industry has a compelling reason to upgrade, most won’t.

Published in the Victoria Business Examiner.

Big Media and the P2P Genie

It seems the record companies just don’t get it.  Acting through the Recording Industry Association of America (RIAA), they’re continuing their quest to kill Napster, a popular MP3 music file sharing network. So far it’s RIAA 2, Napster 0 — sued over facilitating copyright infringement, Napster lost the initial round at trial, and last month its appeal. Napster is now having to operate under an injunction which specifies that it does all it can to not allow its users to share copyrighted files. Upon notification by the RIAA of a file being shared on Napster which is copyrighted, Napster has 72 hours to remove that file from its system. The RIAA must give the title, the artist, and the filename being used.

Napster fans are up in arms over the course of events, as they face losing their favorite source of music. Some are loudly protesting that such copying should be covered under the “fair use” provisions of copyright law — the same claim made by Napster, and rejected by the courts. Other users are busy building software which scrambles the filenames in a deterministic manner, thus being able to share songs without being filtered.

Things obviously don’t look very good for Napster right about now. Napster itself realizes this, and has been trying to settle with the music industry for some time, suggesting a subscription based arrangement as a solution. To date only BMG have come to terms.

And this is unfortunate, because Napster has demonstrated a demand, and built a user base, which could be an opportunity for the industry. People want to be able to download and play music on their computers, and surveys have shown many would be willing to pay monthly for it. The only reason Napster was able to become as popular as it is is that the music companies themselves have refused to allow consumers to sample their wares directly.

The reason for this vacuum from the industry? The Secure Digital Music Initiative (SDMI) was launched February 1999, with a mandate to develop secure watermarking, copy protection and access controls. RIAA members couldn’t imagine making content available on the Internet with it being able to be copied and distributed again once downloaded.

The SDMI is generally considered an unsuccessful effort — a public challenge against the proposed SDMI watermarking technologies late last year resulted in several successful cracks. After more than two years of work no truly secure SDMI technology is ready to be deployed.

But rather than using the existing “new” technologies like MP3 to offer singles and samples to promote their artists, the RIAA and its members have instead sued anyone who makes their content available for download. This includes Napster, MP3.com, and even signed artists who wish to make their own content available.

Ironically, killing Napster is not going to end the problem of music piracy; in fact, in the long-term it’s likely to make it even harder to stop. Napster is only one example of a Peer-to-Peer (P2P) network, and a rather limited one at that. Relying on central severs for its indexing, it is easy to shut it down, and it can only transport MP3 music files.

Several alternative P2P networks currently exist which are ready to take its place, with several more in development. Just go to dir.yahoo.com and search for “peer”. Several of these, such as Freenet and Gnutella, can move any kind of data file desired, and operate in a decentralized manner.

At the same time, the software to “rip” the contents off a CD and compress it into MP3 or OGG format files is now easy to acquire and use. It’s even legal — providing you don’t distribute the resulting files. It is quite common now for people to have their entire CD collection compressed onto a hard drive for easy access when working at their computers.

So while the recording industry tries to prevent what it cannot, it also fails to realize that the sharing actually helps the industry. Surveys have shown that those who download songs they like often end up buying the CD. A friend of mine commented that “people never encode them right”, so if he finds a song he likes, he’ll want the original to encode properly himself.

With their inability to trust their customers, the recording industry is throwing away an opportunity, while not eliminating the problem. In this age of perfect digital copying, amazing CPU power and fast network connections, piracy (in all forms) to some degree will simply happen. It should be considered a promotional expense, not theft. Online sampling of new artists rather than shoplifting.

Will the industry ever see it this way? Not a chance.

Published in the Victoria Business Examiner.