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» VIEW ALL POSTS Mar 24 2008   12:09PM GMT

The economy and technology innovation



Posted by: Beth Pariseau
Tags:
storage technology research

I love listening to NPR. I listen to, watch and read many news sources, but I find the stories they choose and the nuances they bring to their reporting refreshing. I was listening to NPR this morning when a very rare thing happened–I heard someone being interviewed that I’ve interviewed before myself. It’s not often that IT industry news makes a mainstream general-purpose broadcast, so I paid close attention.

The pundit in question was Rob Enderle, a technology analyst I interviewed last month when EMC acquired Pi. After hearing his brief comments on the current state of the US economy and how he predicts it will affect technology innovation in Silicon Valley, I called him up myself and dug a little deeper into the matter with him.

Q. I heard you say on the radio that the adoption of ”green” technologies could be hindered by the economic slowdown. Why is that?

A. Well, I’m talking about “feel good” things, which a lot of “green” things are, like using more expensive recycled materials for manufacturing.  But in a recessionary time, people focus like a bullet on the bottom line–those things where you’re doing something good but spending more to do it will fall off.

Q. Some IT vendors like NetApp and VMware are pushing their technology as a “green” consolidation play. Would that affect them too?

No, the exception would be technologies that allow you to save money, particularly with environmental concerns and the price of oil. The thing is, whatever you do has to have a quick tactical return. People are going to be concerned about this year–products that promise a long-term return will be less popular than products that can allow consolidation and workforce adjustments quickly. If there aren’t benefits within 2 years or so, it may fall outside what people are looking for. Other projects like mainframe consolidation, that take a long time, might also be put off.

Q. Another thing I heard you mention is that venture capitalists will grow more risk averse in this economy. Do you think a recession would mean we see less innovative products?

A. Like everything else in a recessionary year, VCs will have a choice of projects and will be focused on things that are known to be successful and can better demonstrate an assured return. More creative products where the return is not assured will do worse.

Q. So should we expect innovation to slow in the storage industry?

A. Not necessarily. First, people who are entrepeneurial or who have been working in creative, entrepeneurial roles at big enterprises will be incented, particularly at the executive level where they have money, to break out on their own. Large companies are going to be telling some people, ‘all this stuff you’ve been working on is great, but right now I need you to focus on more immediate things,’ and all of a sudden, that person isn’t doing the job that makes them happy anymore. That could provide the seeds for the next innovation wave.

Also, storage is a conservative industry to begin with. In a conservative period of time, one of the areas that will weather it pretty well would be an industry that fits the kind of decisions people are going to be making. People in a conservative mindset are feeling protective, and thinking about protecting things, including data. Where they’ll be shying away from things will be technologies that hold a promise and a risk–that are supposed to improve your environment but they’re new technology for the user.

Q. Might that include server virtualization?

A. I think it’s possible, depending on where companies are with their deployments. People who are halfway through rolling something out will push it through because they just want it over with. People who’ve been just evaluating products might pull back.

Q. How long do you think this period will last?

A. I’m no economist, so I can’t make an exact prediction. I do know that things like the government bailouts and lowering interest rates can cause other problems later on, like increasing or decreasing the value of the dollar. There’s no quick fix to an economic problem like this. And in an election year, it’s pretty hard to get anything done–there’s more interest in coming up with creative ways to blame each other than actually fixing things. I’d say we could see a turnaround sometime during the next Presidential administration, but we’re not going to pull out of it in one year.

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  • Beth Pariseau
    Green tech companies companies can fight the recession by choosing the right lean practices and cutting energy costs by taking advantage of innovative systems. There's over 2700 green companies listed on greencolalreconomy.com who are progressing the green movement. It is true, however, that investing now in something that will pay back over the long term doesn't seem attractive but that is the nature of green business.
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