TECHNOLOGY PREDICTIONS IN 2006
By Ken August, Principal, Technology, Media & Telecommunications practice Deloitte & Touche

If there is one thing you can count on in the technology sector, it's change. 2006 is no exception; in fact we are facing a total technology makeover particularly with the Internet. 2006 might force us to look at technology differently - its capabilities, challenges, and opportunities - in ways we never imagined a few years ago. A study by the Technology, Media & Telecommunications practice at Deloitte & Touche USA LLP examines 10 emerging trends likely to have a major influence on the industry:

1. Search engines will challenge email as the leading digital application.
Rising functionality of search engines, an ever expanding volume of searchable data and higher speed connectivity suggests that search will displace email as the most used digital application in 2006. However the search tool will likely remain immature in many respects - implying even more potential for value to be captured in the future.

2006 is unlikely to see major advances in search engine user interfaces. Consequently, finding useful information may well still daunt the majority of people who are not proficient with Boolean logic. Search will also remain mostly text based, with video, image and audio search still based on keywords, rather than symbols, sketches and sounds.

2. Research and development will become more collaborative as business, government and academic institutions increasingly work together on new innovations.
The move towards collaborative R&D will often be driven by economics. R&D costs are expected to continue rising through 2006, and collaboration may be the only affordable approach.

Businesses will likely increasingly co-operate with government research organizations and academic institutions to access leading edge thinking at a non-commercial level. During 2006, a growing number of organizations are expected to establish small research facilities within universities, as a means of gaining a foothold in the academic world.

3. Offshoring as a way of minimizing costs and optimizing efficiencies will continue to grow in popularity.
In some sectors, offshoring may well evolve from an exceptional practice into a prerequisite for survival. India will likely remain the country of choice for offshore activities, owing to its unique blend of skills, tax breaks, manageable legal and fiscal environment and low labor costs. China will likely also gain, and other developing nations may well see their revenues from such activities continue to grow.

The commercial importance of the processes moved offshore will continue to intensify, with more and more technology companies moving business critical activities to offshore locations. However, most companies will choose to keep their headquarters, along with sales, marketing and personnel functions in their country of origin.

Companies who shun offshoring may, in the medium-term, struggle to find effective means to reduce costs permanently, and to identify new paths to growth.

4. Classrooms of the developed world will incorporate more digital aids in their instruction.
The classroom of 2006 will likely ramp up its assimilation of digital teaching aids. During the year, a growing number of schools in developed countries are likely to install digital whiteboards, such that by 2010 every classroom in developed countries is expected to have on¹ . Schools will also focus on improving the ratio of PCs to pupils, with some countries likely to achieve a rate of one computer for every two students².

The benefits from this new technology will become more obvious as an increasing quantity of teaching material is made available, and as teachers develop their ability to use these new tools. One possible benefit is that teachers from around the world will be able to share lessons with each other, enabling rapid assimilation of high-quality interactive educational materials.

5. Open source will pose an ever-greater challenge to the established software model, impacting both providers and end users.
In 2006, open source's growing adoption will likely cause many in the industry to take a different view towards the value of intellectual property, and how to best leverage it. Many established software players may well choose to provide previously proprietary intellectual property to open source communities, recognizing the power of the open source model as a distribution mechanism; and one which need not threaten the value of intellectual assets³.

The hype caused by open source will likely catalyze market entry, particularly encouraging start-ups building enterprise grade open source products. Some new entrants will likely focus on developing service and maintenance businesses based on open source software provided; others may develop integrated closed and open source software solution; others may rely on charged-for ancillary toolkits to generate revenues.

6. Governments will increasingly regulate the Internet.
Ever since its conversion into a global, common good, the Internet has been relatively unregulated. In 2006, governments will probably increasingly be encouraged to lessen some of the disparities between what happens on the Internet and what is allowed elsewhere. This will reflect the fundamental transition that has occurred to the Internet: it has evolved from being an essentially amateur body, with a fair degree of self-regulation, into a largely self-interested, commercial infrastructure generating billions of dollars of revenue every year.

7. Technological advances such as speech recognition and voice synthesis, along with improvements in artificial intelligence, will change the way humans interact with computers and computers interact with each other.
Technological advances may well reinvigorate adoption of the thus far niche interfaces such as speech recognition and voice synthesis. Furthermore well designed artificial intelligence applications may remove the need for some interactions altogether.

In 2006 and beyond, a growing number of services, from directory inquiries to tourist information, will likely start to incorporate increasing degrees of natural language speech recognition - often without the public even realizing it. Previously, public natural language speech recognition applications were hampered by the cost of the processing power and memory required to look up instantly millions of voice samples. Similarly, speech recognition and voice synthesis will likely be combined with basic artificial intelligence to create a wide range of services, for example, within vehicles. Possible applications include: distance monitoring, collision avoidance and voice controlled appliances (such as air conditioning, windshield wipers and stereos).

8. Products will become less static with the launch of many more devices, from cameras to cars, that can be upgraded remotely.
Less than a decade ago, products were largely static. Once a product rolled off the assembly line, its features and functions were effectively set. But this is changing: 2006 will see the launch of a widening range of devices, from cameras to cars, that have the ability and necessary connectivity to be remotely upgraded, updated, and maintained.

Manufacturers and customers have become accustomed to remote software updates on personal computers, and increasingly, mobile phones. The update mechanism will likely most often be used for software and firmware upgrades, bug fixes, and the purchase and delivery of additional features and services, both frivolous and functional.

Indeed the value of frivolity has been shown by the $5 billion mobile phone personalization market, based on ring tones and screen savers - digital products small enough to distribute over a cellular network⁴ . These files, costing up to several dollars, allow users to customize their devices without changing the underlying capabilities or functionality. In other sectors, of course, data will likely be downloaded for more serious purposes. The ability to update maps in GPS receivers, add new features to in-car computers, or patch software bugs in a set top box will all have value for customers. Their value to manufacturers will also be significant.

9. The gap between those with digital technology and those without will widen and put undeveloped countries at an even greater disadvantage.
Historically, the digital divide has been most noticeable between developed and developing countries. This will most likely continue in 2006. Citizens of poorer nations will be increasingly disadvantaged by their lack of access - to the media, to the Internet, to electronic communications, and to information in general. Many organizations will probably focus on the problem, but little change is expected during 2006.

The digital divide in developed countries is also expected to deepen along two key dimensions. The first dimension is access to lower cost products and services. Many poorer households will likely still be unable to afford the cost of a computer and connectivity, while wealthier households with Internet access will pay less to connect to a growing range of products and services, from airline tickets to voice communication. The second dimension is job skills. People who grow up without ready access to PCs at home or at school will generally lack the technology skills needed to qualify for the best jobs.

10. Those technologies that permanently change human behavior will continue to be the most profitable.
Technology's general impact on the world will most likely become more pervasive and comprehensive than ever in 2006. However the technology-based products and services with the greatest impact on the bottom line will likely be those that permanently change common human behaviors. Among them will likely be products and services whose trade names ultimately become entries in the dictionary.

In recent years, technology has changed people's behavior in a variety of ways. Thanks to the digital address book in mobile phones and personal digital assistants (PDAs), people dial names, rather than memorize telephone numbers⁵ . Portable PCs and broadband connections have enabled remote working; mobile email has made the employee more accessible than ever. Behavior-altering technology will tend to be that which takes commonplace functions and makes them a combination of: more efficient, more user-friendly, quicker, more secure or even more entertaining.

¹Exciting time for the interactive technology channel, IT Reseller Magazine,
http://www.itrportal.com/absolutenm/templates/?a=2695&z=5

²One stop, non-stop, government, Accounting and Business, 1 June 2000; ICT in Schools
Standard Fund Guidance for Schools and LEAs 2003-04.

³How to make money off Open Source, eWeek, January 2004.

⁴Ovum forecasts global wireless markets 2004-2004, Ovum, December 2004.

⁵What's in a number?, The Telegraph Calcutta, 28 March 2005.

For more information about Deloitte & Touche's report on TMT Trends: Technology Predictions 2006, or to request a full copy of the report, please contact Ken August, Principal, Technology, Media & Telecommunications practice. He can be reached at kaugust@deloitte.com.

 

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