Sun Microsystems Inc. expects services-based companies to emerge as the new leaders in the Internet space over the next five years, following the worldwide dot-com fallout.
At the annual Sun Media and Analysts Symposium held in Singapore last week, company officials said services-based companies will have greater chances of success because they have learned from the mistakes of the dot-com companies that came out during the first wave of the Internet boom.
Small to medium-sized businesses will drive the need for service providers, said Masood Jabbar, executive vice president for Sun's global sales organization. SMEs are realizing the advantages of automation but are hindered by the steep cost of technology. Engaging with service providers who offer cost advantages has become a more attractive option to these type of companies, he said. "In the future, people will be buying services. They will no longer be buying hardware from Sun alone, but solutions that are part of services," he said.
Another lesson learned from the dot-com fallout is that risks are reduced by being in a group, said Jabbar. By partnering, companies can offer best-of-breed solutions that customers are looking for. If one company goes it alone, the solutions will be likely proprietary or will not be flexible enough to meet customer requirements.
"No one company can dominate anymore because there are a lot of innovations in different industries. The world is too smart now to fall for proprietary solutions," he said.
Profitability will also have greater importance for the new dot-com companies. "Profits are back in. If it's just a captivating idea, if it can't get the profits, then that's not a good business model," he said.
Lionel Lim, vice president and managing director for Sun Asia South, added that compared to dot-coms of the past, the new dot-coms will be building their business with the assumption that profits are important.
"The advantage of the dot-com IIs is that they're coming in with a bigger surety because of the experiences of their earlier counterparts," he said.
One problem in the first wave of e-commerce was that everyone wanted to get rich quick and people rushed to get into the Internet. People treated the Internet just like a casino and then the bubble burst, said Lim.
Jabbar said that traditional brick and mortar companies are moving quickly to lead in the Internet. During the last Christmas shopping season in the U.S., people chose to shop more from the online sites of such traditional names like JC Penney and Walmart, among others. In the previous years, Internet startups dominated the online shopping scene in the U.S.
In the future, pure Internet companies and traditional companies will look more for consolidation of their services, predicted Jabbar. These companies are realizing that it is better that way. One example, he said, can be seen in the ongoing talks between Amazon.com and Walmart. Both are under tremendous pressure as single entities, but by partnering, although it's not yet clear how they will go about it, they can better compete in their industries, he said.
In the next five years, there would still be some fundamental changes that companies must also consider, he added. Aside from the shift to services provided through the network, the network itself must be open and the services should have context. Context means that other value-added information can be provided in addition to the information requested.
"If I book a flight and that flight is canceled, the system will automatically contact me through my cell phone and tell me that my flight is canceled and provide me with other options," he explained.
Companies should also look out for disruptive technologies. "The increasing globalization brings both opportunities and problems for those who don't know how to take advantage of it. Another disruptive technology is peer-to-peer (P2P) technology. There are a lot of opportunities for P2P, but most of the issues surrounding this are still unresolved. Sun itself has started a study into P2P technology to see how it can be brought into the enterprise," said Jabbar.
The constantly-growing amounts of data being digitized is proving to be another challenge, he said. Companies should look into storage solutions more closely to be able to cope with the growing amount of data being created. Optical networking is another area of interest because the increase in bandwidth will open opportunities for vast ranges of applications and services.
Companies may also consider taking away price lists, as dynamic pricing or auctions prove to be a more effective model, he said.
"In the future, people would say that they no longer want to work for eight hours a day but only five hours a day. So they can auction their services on the Web and get what they are really worth, and what companies are willing to pay them," he said.