Cold Technology

In a world where affordability, value for money and a reduction in the total cost of ownership are increasingly becoming themes driving technology purchases, what Pip Coburn of UBS Warburg has called "cold technologies" are emerging. Richard Karlgaard of Forbes magazine labelled it the "cheap revolution."

Coburn wrote in a research note in early 2003: "A cold technology issue is one that commands a major portion of the agenda while having neutral revenue or even anti revenue attributes.

"A hot technology has the potential to generate revs. So, in 1980, whether one was a fan of the PC or not, both would agree that if the PC took off, the tech pie would expand.

"The PC was a hot technology. Linux is a cold technology.

"It will shrink the pie. Cold technologies often are issues that are not product related but gain a disproportionate share of the agenda. The migration of the food chain into China is a cold technology issue."

Sure, companies are still ga-ga over open-source software like Linux, they are adopting voice over IP phone services, they are buying densely packed 'blade servers' and they are spending generously on security software.

They also are forking over large sums to meet the stringent audit and reporting demands of Sarbanes-Oxley. But the dollars involved in all of those simply aren't enough to move the needle on tech spending, given the huge size of the overall technology business."

In the past, the technology industry built it, and the users kept coming -- wanting the next new thing. But this is no longer true. There is a shift in thinking in enterprises, big and small -- the focus now is on getting the maximum value from new investments.

In developing countries like India, cold technologies are even more important. They will help the market expand beyond the top 10 per cent.

Cold technologies are important in our context because even as they shrink the investment that users have to make, they help them catch up or even leapfrog to a world that is 'faster, better, cheaper' in terms of the digital infrastructure that we need to build in India.

So which are these cold technologies?

Open-source software: The remarkable growth of Linux and open source has provided alternatives across the software stack.

The Apache web server, PostgreSQL and MySQL database software, JBoss application server, OpenOffice desktop productivity suite and Asterisk IP-Telephony solution are some examples of open-source applications which are taking money away from commercial applications by offering alternatives at significantly lower prices.

Software as a service: The emergence of companies like Salesforce.com (customer relationship management) and Ketera (spend management), which offer software as a service is challenging existing incumbents like Siebel and Ariba.

The traditional software industry model has been to charge upfront for software, with additional charges for upgrades and maintenance. The new generation of application service providers now offers software delivered over the Internet for a monthly fee -- just like a utility company.

Voice-over-IP: Internet telephony is turning the world of telcos upside down. From being able to charge by distance and time (based on where the called party was and how long the conversation lasted), phone calls have become a fixed price commodity as they are shifting to the Internet.

We have also seen this in India with phone calls to the US being advertised for under Rs 2 per minute, compared with nearly Rs 100 a few years ago. Software like Skype offers free person-to-person calling via computers.

Wi-Fi: Mobile phone companies globally have paid tens of billions of dollars for 3G licences. The world on offer: ubiquitous, high-speed Internet access. The problem: the future may arrive unscheduled. This is happening because of Wi-Fi (which uses unlicenced spectrum) and other next-generation data technologies.

(Rajesh Jain - Managing Director of Netcore Solutions Pvt Ltd.)