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How Wall Street Sentiment Could Shape 2024’s Tech Trends
What really drives technology spending and technology change? Sure, network technology has changed enormously over the last fifty years. We’ve gone from a day when a data connection of 4800 bits per second was leading-edge enterprise technology, to one where a four-year-old child would reject it out of hand. The average household has faster broadband available to them than did the headquarters of major corporations back in the 1990s. Technology has driven networking a long way forward, but what drives technology forward? Answer: Wall Street.
Remember Jerry Maguire’s famous line, “Show me the money?” This is a capitalist world, so the money for tech ultimately comes from investors, meaning from Wall Street. The Street’s predictions describe the best and worst-performing segments of the market, which is a guide for how companies should plan their own products and sales/marketing. Even if they don’t come true, Street predictions show companies what technologies will be rewarded early, even before changes in sales and profits show in quarterly reports. Thus, to a degree, they’re a self-fulfilling prophecy.
So let’s see what the Street is soothsaying. Starting at the top, what Wall Street is saying is that application software is going to be stronger this year, and likely next year as well. The reason is simple; application software connects tech to business processes. That’s the fundamental requirement for any new business case, and so we can expect to see more spending on applications as companies align with new economic conditions.
At least one Street analyst has jumped off from this point to SaaS. No, not the “software-as-a-service” SaaS, but what they call “Selectivity as a Strategy.” What they’re selecting on is a combination of the credibility of the software’s mission, and of the software’s source. This means not to expect software overall to be great, but to expect that software as it relates to improvements in sales and marketing, and software from vendors like Salesforce, Microsoft, Adobe and Oracle is where the action will be. This focus has a lot of logic behind it. First, if we assume that overall economic uncertainty has kept tech spending under pressure, it makes sense that when that uncertainty fades, the first step a supplier should take is to improve engagement. Second, a market leader source makes sense when time is of the essence.
Customer engagement is part marketing,(so the Street likes Adobe because it provides businesses with the tools to build marketing collateral., Customer engagement is also part customer relationship management (CRM), so the Street likes Salesforce, and finally, customer engagement is part online prospecting and support, so the Street likes chatbots and AI tools... and collaboration. One Street report on software that I rea mentions collaboration a half-dozen times, so you might see this as the start of the golden age of collaboration. Not so fast; there are major complications to consider.
What, exactly, is “collaboration?” It’s really a description of cooperative behavior to achieve some goal. The kind of behavior, the parties involved, and the goal all combine to shape the specifics of collaboration, and that means that enterprises divide the all-to-general category into a bunch of loosely related activities. AI chatbots, for example, are collaborative tools that are seen as positive. Web meetings and even conference-room video systems are collaborative tools, but they don’t all serve the same missions and they’re not all favored by the kind of software priorities that Wall Street is seeing.
You’re probably wondering about call centers. Classic collaboration is often focused on the call center and on the distribution of calls or chats to agents. This form of collaboration is actually what the Street is hoping will be stamped out by AI. And, if replacing human interaction with AI is possible , it’s linked less to software than to networking, and for the Street that isn’t just bad, it’s very bad. To understand why, we need to understand the pending Hewlett-Packard Enterprise acquisition of Juniper Networks by thinking about bathrooms.
Juniper is a big player in the network equipment space, so you might see its acquisition as a good sign for network gear, but companies sitting on an exploding market aren’t usually looking to be acquired. I think what’s behind the HPE/Juniper deal is the fact that the network is the equivalent to the pipe that leads out from your fancy bathroom. Yeah, the bathroom needs it, but you’re not going to look to the pipe supplier to sell you the shower surround tile or leopard-skin toilet seats or any of the stuff that drives end-user’s bathroom design decisions. The other way around is way more likely; whatever your contractor-cum-glamour fixture supplier happens to specify in the pipe department is what you’ll likely use. HPE sits higher on the business case food chain, so it’s more likely to be able to sell stuff that actually creates new benefits, and that lets it pull through the Juniper gear. “Remodel your bathroom with HPE” is their message, rather than just replacing your plumbing.
Owning the entire stack has major implications, and not just for collaboration. Big players, engagement with line departments, one-stop shops ... these are the things that the Street thinks buyers want these days, and based on what buyers tell me , the Street is right. Any “call center” strategy is a bad one because what buyers want is a “customer engagement center.” It might sound like a simple semantic shift, but it’s actually a profound shift in who you sell to, how you sell, and what you sell. Technology products that are being bought to modernize established infrastructure are bought like repair parts, and we’ve been stuck in the repair mode for over a decade. The Street thinks it’s time to remodel.
OK, but you can’t sell “remodeling” in abstract -- you have to sell products and services that serve a specific end goal. If collaboration isn’t about calling and chatting and connecting, then what it is about? “Software” is way too general, and old-hat. The obvious answer is “AI!” and AI is also a likely centerpiece for the Street’s expected meteoric rise of software. Adding intelligence to software in general, and to collaboration in particular, seems a pathway for businesses to achieve that elusive goal of “doing things better.” Rather than depending on expensive human resources, depend on AI software. Whether AI can possibly live up to the hype is another matter, but it’s surely going to be the poster child for the software-to-business-case linkage that both Wall Street and enterprises want and need.
The key point here is that when you’re assessing what’s going on in tech, Wall Street’s beliefs are as important as business case reality. CEOs and CFOs aren’t going to take steps the Street distrusts because they’d risk tanking their stocks. That means that software and applications will trump hardware and networks, big companies will trump (and maybe buy) smaller innovators, and everyone will paste the letters “AI” on billboards facing the media. At least, that is, until mid-summer, when the results of all of this start percolating through earnings reports. Then, there may be a new reality to face, so we’ll revisit these points for a mid-year gut check.