The humbling fall to earth of the high-technology industry over the past 18 months has brought a series of changes, among them the reduced value that the stock market places on many companies and a more sober view of information technology's power to transform the economy and the culture.
One byproduct has been a significant shift in the balance of power between buyers and sellers in the technology sector. In the bygone era of a few years ago, when established companies in every industry were said to be threatened with extinction by an upstart dot-com, computer hardware and software was bought with abandon, motivated by fear and fashion. Many corporate executives have a lingering sense of being duped a bit by the grand promises of the industry's "visionaries," who, after the party, look more like mere salesmen.
Today it is the corporate buyers of information technology who hold the whip. Evidence of the shift in power to buyers, and away from vendors, is everywhere. In the industry, the notion of "putting the customer first," given cynical lip service in the past, is now regarded as deep wisdom.
The new ethos was amply on display last week at the annual PC Forum in Scottsdale, Arizona. Esther Dyson, an influential industry analyst and publisher whose newsletter Release 1.0 is determinedly focused on the intersection of the present and the future, was host of the conference. PC Forum, in its 25th year, takes the same approach, mixing executives of industry stalwarts like Microsoft and Intel with aspiring start-ups, venture capitalists and others.
A striking feature of the gathering this year was the prominence of chief information officers of old-line companies like American Airlines and General Motors. They were the stars of the show, and the discussion topics included "The Politics of Enterprise Software." These days, a promising start-up needs a few big corporate customers to attract the venture capital needed to survive.
With the weary wisdom of experience, Monte E. Ford, the chief information officer at American Airlines, spoke of the software industry's penchant for promoting a "new savior product" every few years -- enterprise resource planning software, customer relationship management software and the industry's current darling, Web services.
Because corporations account for so much of the investment in information technology, their buying decisions are crucial to establishing industry standards. "We end up being kingmakers," Ford observed. Yet the vendor kings -- like SAP, Oracle, Microsoft and Sun Microsystems -- have emerged with more market power in their hands than the corporate customers, even the largest. The customers' power to play the kingmaker, Ford said, has often turned out to be "a sort of self-defeating proposition."
Yet the big customers have been flexing their power lately. A good example is the Liberty Alliance, a consortium of technology companies, led by Sun, and many large corporate customers like United Airlines, American Express and General Motors.
The Liberty consortium, announced last fall, was formed to develop online identification technology for Internet commerce. Liberty was established at a time when a pair of online identification technologies were under development -- one from AOL, with an initiative called Magic Carpet, and another from Microsoft, with its Passport sign-on system well along.
The airline, auto and credit card companies feared that AOL and Microsoft might use their ID offerings -- which allow consumers to fill out a single form to shop on the Web, instead of having to fill out separate forms at many Web sites -- as a leverage point to lock in consumers and dominate Internet commerce.
Another big technology company, Sun, was also known to be working on online ID technology. Three weeks before the Liberty Alliance was announced in September, Sun and about three dozen other companies met in San Jose, California. The fear among the non-technology companies, Tony Scott, the chief information officer of General Motors, said in an interview, was that "we saw this really ugly scenario with the potential for erosion of consumer confidence in the Web."
"This was not a good area," Scott said, "to have a big technology battle" by offering a service that would exclude rival products.
So as soon as the San Jose meeting began, Scott said, the assembled companies had a simple message for Scott G. McNealy, the chief executive of Sun. "We told McNealy that if you want to use this as a stick to beat up on Microsoft and AOL, forget it. We're out of here," Scott said.
Indeed, Sun has stepped a bit to the side in the Liberty group. It will be technology supplier, but the alliance is led by others, with Eric C. Dean, the chief information officer at United Airlines, serving as president. Liberty has pledged to take a "federated" approach, meaning it will work with other online ID technologies, or "interoperate." Since the Liberty announcement, Microsoft has pledged to adopt the federated model with its Passport service.
Yet the shift in power toward the corporate buyers, it seems, is more a corrective swing of the pendulum than a permanent transition to making technology companies mere order takers. That is because the high-tech industry still does have the capacity, as it always has, to come up with innovations that change the way people work and play.
Customers often help new innovations find their best and most practical uses. Technology is a tool to help solve a problem that customers know they have. But a singular focus on the customer can be a rearview mirror, a lesson recalled at PC Forum by veterans of many a technology cycle.
There was no great customer demand, for example, for Internet browsing software. It was developed by a couple of students at the supercomputing center at the University of Illinois, who went on with others and founded what became Netscape Communications.
"Netscape brought to the world a whole new way to look for information," observed Eric Schmidt, the chief executive of Google. "It shows that sometimes the technologists are right."
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