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Tech: Long term bet - Views on News from Equitymaster
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  • Nov 12, 2001

    Tech: Long term bet

    For quite sometime now technological advances have been driving the speed at which business can be done. As a by-product, a whole new set of businesses is taking shape. The Internet, for example, was never born out of business needs but out the needs of a country to keep communications channel open even in worst of all possible scenarios. And once the businessman saw the possibility in the technology, as always, he wanted more.

    He still does. Then why have the markets been averse to technology stocks even at rock bottom valuations? Obviously, there are some doubts about the future of technology. We evaluate some reasons why the technology sector has miles to go. Till date technology has helped produce at a lower cost, given real time information and access to the whole world through the Internet. With gigantic ERP (enterprise resource planning) systems, the digitization of internal business processes within organisations is almost complete. But by no means over, as the next demand from services providers could be for solutions that will help the different ‘islands of information’ talk to each other. The different enterprise applications will need to be integrated. (Read more on EAI)

    The conquest of the abstract
    Other areas that technology could address are the softer issues of business. A good example is knowledge management. (Read more on knowledge management). As people gain experience with technology, the conquest is now of the abstract. To capture and store the business acumen accumulated by years of experience seems quite impossible. But that is one of the challenges that technology will have to face. More so in the post Sept 11 scenario, wherein organisations like Cantor Fitzgerald lost 700 employees in a single act of insanity. With no guarantee that such acts won’t be repeated, organisations have becoming increasingly interested about disaster recovery solutions. The next step will obviously be to capture and safeguard organizational knowledge.The next step will obviously be to capture and safeguard organizational knowledge.

    Whether businesses have been able to use IT effectively or not is a different story but they have certainly managed to religiously create vast amounts of digital data. Many organisations have taken the help of technology to mine hidden business gems from these mountains of data using models like cluster analysis, regression and neural networks. Businesses are trying to discover various patterns and facts hidden to the human eye.

    The mobile infrastructure
    We have a wired world in place but unfortunately the wired world is ‘wired’ and to access it on the move is a bit of a spot. Technology is addressing this problem too, by making it possible to access information at anytime and any place. Thus satisfying the need for mobile computing and wireless access devices. The WAP (wireless application protocol) was a big disappointment. However, SMS (short messaging service) has caught on like wild fire. Mobile Internet access remains a distant dream (3G). NTT DoCoMo's 3G services that were launched on 1st October have been severely restricted in operation. According to the company, the service is confined to within Tokyo National Route 16, a 30 km radius from central Tokyo. DoCoMo expects that by March 2002, it will have 0.1 m users. The number is to increase to six million in three years. As per Cahner’s In-Stat Group, on January 1, 2000, the worldwide penetration of wireless service was approximately 7˝%. Penetration is projected to exceed 32%, on a global basis, by 2010.

    Wired local area networks are now being replaced by the wireless Ethernet (802.11b). The technology offers the facility of roaming around in a building or in the vicinity and yet being able to connect to the LAN. The biggest benefit being cost savings as no wires have to be laid. Once the infrastructure is in place business will undoubtedly utilize the mobile Internet platform for transactions. For this the infrastructure needs to be secure. This means that there will be need for wireless security solutions.

    And a whole lot more...
    But the strongest case for technology is that slowly, very slowly, technology is changing our way of life. Over the past few years, the way we seek information on products has changed completely. As people gradually get used to searching for information over the net they might as well as go ahead and transact. Other areas like entertainment and healthcare are also undergoing the digital evolution. We have looked at a very few opportunities that the Indian software industry can look at. There are hosts of other opportunities that are equally as big. Therefore, investors need to take advantage of the current fear of investing in tech stocks. This of course is based on the long term picture.



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