10 Predictions For 2011

I make technology predictions every year. Last year I provided a list of 10. If you’d like to check them out, now that a year has flown by, click here. This year I decided to do two lists of 10. It’s not so much that there’s more to say, although there is, it’s just that there are two major forces that affect the technology world, consumer push/pull and corporate push/pull. So I thought I’d write a set of likely developments for each. This first collection of ten concern what I perceive to be consumer IT trends

1. It’s Over For The DVD. The Decline of Cable To Begin. BlueRay to Evaporate.

There are two things that killed the BlueRay DVD:

1. There was no killer app important enough to make consumers want a BlueRay player. Suggestions, for example, that 3D would rescue BlueRay were wildly optimistic. Truth is: someone needs to rescue 3D. Consumers don’t like wearing goofy glasses in the home.
2. Video streaming and the cloud make DVDs irrelevant.
So while the BlueRay funeral is in progress, let’s question the health of the cable business. The cable companies owe their powerful position to the set top box, which you get for free, but which you inevitably pay for. In most cases the set top box is actually a sealed Linux computer. The cable companies prospered by bundling Internet access, with telephone service and cable channel rental. Sadly, their pricing doesn’t make sense any more and consumers are beginning to notice. All you really want is the Internet connection, because everything else could come through the Internet. This means that cable bills could be cut dramatically – and they will.

In the last year the availability of Netflix, YouTube and other Internet based video services, direct to the television increased significantly. This increase will increase.

Did you notice that Netflix shares rose about 219% last year. This compares to Comcast (28%), Time Warner Cable (56%), DirecTV (19%), Cablevision Systems Corp (30%). Investor’s money is currently voting for the Internet access channel, and so am I.

Note: This prediction focuses on the US market. Because of different competitive and regulatory situations, different outcomes are possible in other national markets.

2. TVs Become Computers. The end of  the TV as we knew it begins in 2011

You could say it began last year with the advent of the Google TV. But it made less of a splash than I expected. Technically, a television is a simple device that converts a signal into pictures and sound. Set top boxes, the TiVo, the Apple TV, the Roku and other such devices are computers, which could easily be embedded in the television. They are all programmable, but they are currently all closed systems. Google TV broke that paradigm, but never sold in big numbers.

That notwithstanding, this is an idea whose time has come. In 2011, other companies will get involved in this move. Apple will probably be first to follow suit, especially as its Apple TV has been selling well. If not, it will feel obliged to enter the market soon enough. Eventually, all TVs sold will have computers embedded in them.

3. Victory To The Mobile Carriers. And another migraine for the cable guys

A reality that hitherto helped the cable operators feel secure was their ownership of “the last mile.” Sadly for them, the last mile has gone mobile. We are entering the era of 4G speeds which are: roughly 1 Gbit/s (for stationary users) and about 100 Mbit/s if you happen to be on the move. 3G speeds are similar to cable/land line speeds, which are in the range 1 Mbps and 6 Mbps. The last mile has gone mobile and it has enough bandwidth for a whole family’s use.

4G is only just available in the US. Right now the price is prohibitive for replacing a cable service (typically it is charged at about $10 per gigabyte), but you can get 3G unlimited data for $40 per month. Ever since the advent of 3G people have been dropping their land lines. Technology is dictating that they’ll soon be dropping their cable services too.

If there’s a long term business in being a carrier, it belongs to the mobile carriers. Bye bye cable guy.

4. Realism in  the Mobile Market. Apple will be seen to dominate the cell phone market.

I don’t think Apple’s current technology lead is well appreciated. A significant achievement last year was its production of a 300 dots per inch (dpi) screen for the iPhone and iPod. 300 dpi is as good a resolution as the human eye needs. No other vendor has yet achieved this on a mobile phone. Competition on cell phone’s is driven by the following five factors:

1. Screen resolution
2. Battery life
3. Computer power
4. OS
5. App Store

Apple leads in all of these. In reporting mobile market share, commentators usually equate Android with the iPhone, but it’s an apples to oranges comparison. In fact it’s an outright wrong. Android is just one factor here, and the customer is interested in all five. The more accurate way to depict market share is to put the iPhone up against all other cell phone models and see what the numbers tell you.

Right now they tell you that Apple leads the market in the US and when Verizon finally offers the iPhone (next year), it will obliterate most of the competition in the US, even if it is still not carried by T-Mobile or Sprint.

5. What’s Not In Your Wallet? The electronic wallet on the smart phone will come of age.

I had thought that  the electronic wallet/credit card on the iPhone would be a no-brainer, but it’s taken a while for any kind of capability to appear. Next year I expect it to take off. So far I’ve run into two interesting payment capabilities:

1. XipWire which is a payment capability of the phone, and
2. TabbedOut, which allows you to set up a tab at a bar or restaurant (currently it works in a limited number of US cities.)

Watch for more applications to appear. These are not trivial applications by the way,  because security is a big issue in providing such a service. But nevertheless, why is PayPal not already there?

6. The Laptop in Decline. The tablet/pad computer will marginalize the laptop

I made some bold predictions about tablet computing last year (3 months before the launch of the iPad.) They turned out to be correct, or at least close to correct. The only thing that surprised me was that the iPad met with so little competition. The most outrageous estimate of iPad sales given at the time of announcement (January 2010) was mine (it was at least 50% higher than any other published estimate). But it was wrong. I suggested that Apple would sell a million a month in 2010. The figures are not in yet, but I know the estimate was low (see Why The iPad Will Kill The Etch-A-Sketch) Before the holiday quarter Apple was already selling more than 1 million per month. It was probably selling 2 million per month in November and December.

In 2011, the tablet computer will begin to redefine personal computing, in conjunction with the smart phone. The corporate uptake of tablets in the US (already at about 7% of companies) will quadruple at the very least. Their use in education and in heathcare will explode. The Netbook market is now so severely affected that it does not make sense any more to think of it as separate to the laptop market. The laptop market itself is also affected – some estimates suggest a 25% decline (against earlier projections).

Sometime before Steve Jobs declared the end of the PC era, we wrote Is The PC Era Really Coming To An End? pre-agreeing with him. The point here is that the tablet computer will become the defining personal device (in conjunction with a smart phone). It will evolve, beginning with version 2 of the iPad. In time, and it won’t take more than two years, there will be more people who carry tablets than who carry laptops.

Starting this year, the laptop should be thought of as a mobile PC that competes with the tablet. By the end of 2011 the numerical trends will show the laptops in clear decline and tablets coming to domination.

7. No Competition. Apple will walk away with the tablet market.

This doesn’t need much little explanation, as it has already happened. There are aspiring competitors, it’s true: RIM (with it’s own OS), HP (with Web OS), Nokia (with MeeGo OS), Microsoft with Windows and Google with Android. Google and Microsoft are depending upon others to build the physical tablets. There are almost no competitors for the iPad right now and Apple is miles ahead. By the end of 2010 it will look like the MP3 player market all over again. Apple will have 80% share or more, and none of the others (with the possibe exception of Google with Android) will have a significant slice.

It’s the applications that define this market and only Apple and Google have well developed app stores. In this Google is vulnerable because more effort is required to develop for Android. So Google could be overtaken by one of the other aspirants, but it seems unlikely. All other tablet aspirants will be confined to a niche for the lack of a thriving app store and developer community. Any developer who develops something innovative which is not on the iPad will migrate it to the iPad as fast as possible, for the sake of revenue. Apple has by far the best software and content ecosystem and, even if Apple were equalled or beaten in terms of tablet hardware, it would still walk away with the market.

But Apple won’t be equalled at the device level either. There are four primary dimensions to the tablet market:

Weight
Battery life
Computer power
OS

Apple, to its credit and greater financial glory, invested very heavily over the past decade in reducing the weight and extending battery life. With OS X it has the advantage of reliability and maturity over other vendors. You can think of Apple as having a range of products iPod, iPhone, iPad, Macbook Air, Macbook, Macbook Pro that fit these 4 dimensions better than the competition. Apple has its own battery technology and its own chip technology and a whole series of patents that keep the competition at bay.

Unless it runs into volume manufacture problems, Apple will sell over 50 million iPads in 2011 – possibly 60 million. In case you wondered, Apple currently has 95% of the tablet market. It won’t fall below 80%.

(Note: From a competitive and technology perspective, it’s not a healthy development for Apple to run away with the tablet market and the smart phone market, but for the current year at the very least, it’s what will happen.)

8. Bye Bye Yahoo. Here comes Facebook.

The over-exuberant Dot Com investors got it completely wrong. It wasn’t about clicks, it was about clickiness;  the combination of clicks and stickiness. So after  the dot com collapse, we still say dramatic dot com successes; like Google (Google was but a babe in arms when the dot coms crumpled), PayPal, YouTube, Skype etc.

And it didn’t stop there, we had the shooting star of MySpace, which was quickly eclipsed by Facebook, and then (predicted by nobody and, perhaps, as big a surprise success to its creators as anyone else) Twitter. Twitter is unlikely to fade, but it may get acquired by Google.

Facebook is clearly a different order of business. In 2010 it overtook Google as the most visited site on the web and if I were Eric Schmidt I’d be worried. The simple facts are these:

• Facebook is about to IPO and it will undoubtedly be a successful IPo.
• Its only route to revenues is through adverts, which makes it a very similar company to Google in terms of business dynamic. It’s about advertising.
• There are only so many things you (as a user) can do on the Web and between them, Google, Microsoft and Yahoo do most of them. Facebook will thus be obliged to compete head to head with these three giants. (email, search, news, games, etc.)
• It’s a clickiness contest.

It’s easier to pick the loser than pick the ultimate winner. Yahoo is the loser.

Personally I think Facebook wins on clickiness. In 2011 Facebook will challenge Google directly. I expect it to do better than “hold it’s own”, but it won’t halt Google’s momentum. Not in 2011.

9. Microsoft to Connect With Kinect. What lies beyond the gaming market.

Kinect is brilliant technology. So far it has attracted less publicity than it deserves and, for sure, it will push Microsoft into the dominant position in the console games market, ahead of Sony and Nintendo. Nintendo should have made the most of the technology lead it had with  the Wii, but Microsoft has clearly overtaken it.

In my view, it is commercially necessary for Microsoft to take advantage of this “first technology victory since the ascent of Ballmer.” The potential that Kinect has as an interface is not yet clear. However what is clear is that the User Interface is one of  the major technology battle grounds. Apple is now dominant in  the consumer space (and to some degree the corporate space) because it, not Microsoft, popularized  the touch interface.

Microsoft tried to invent the tablet computer and failed. Apple moved in a full 9 years later and succeeded. Microsoft is now “drinking in the Last Chance Saloon.” If it doesn’t make a success of Kinect beyond the gaming market, then it is probably finished as a technology power. I believe that we will see Microsoft ride Kinect technology as hard as it can, starting this year. For Microsoft it is now “innovate or die.” I  believe it will innovate.

10. The Evolution of Home Computing. The home PC will become a home wireless LAN.

Most people now have a LAN in their home, so what am I saying? I’m saying that they’ll realize it. Apple understood that this was the direction. It planned for it and built products for it and it will reap the financial rewards for many years to come; possibly even decades. Microsoft planned for it and blew it.

It is not yet clear how thoroughly Apple owns the home computing market, but it will become clear. Watch the sales of Apple TV. Most commentators think of it as an unimportant product, partly because Steve Jobs still tends to refer to it as “a hobby” and partly  because, at $99, it costs less than an iPod Nano. But it’s heralds a revolution, because as soon as you own one, you home computer environment clearly becomes a LAN. It changes the way you think about computing in the home. (And this is before Apple opens it up to software developers.)

All your music, all your photos, all your videos (that you have on disk) plus the Internet (Netflix, YouTube et al) suddenly become available on TV. The Apple TV may not be the only device that promotes this perception, but that doesn’t matter. It’s out there and it’s selling fast. So  the perception is growing

In 2011 consumers will begin to perceive themselves has having a collection of interacting networked devices. Home computing with evolve from there, as more devices are added to the LAN; security cameras, A/C and power management, dog walking machines, etc.

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This article was originally published by TheVirtualCircle

Photo Credits: Flickr CC afsilva, Kevin Steele, Leeks, Photo Giddy, Kyle McDonald