E-commerce
At the end of 1999, predicting the year ahead for companies involved in e-commerce was easy: explosion followed by implosion. It happened exactly as expected - a surge of new internet start-ups was followed first by a puncturing of some of the ludicrously high valuations put on the bubble.com companies then by the actual failure of some of the first-wave companies like Boo.com, Boxman and Clickmango. Meanwhile in the business-to-business (B2B) sector, accounting for 80% of all e-business, things purred along nicely, apparently immune from the forces that made it difficult if not impossible for any business-to-consumer start-up to make a profit.
Next year will be more difficult to call because it will be a mixture of several forces all happening simultaneously. First, web start-ups will continue to go bust or be rescued by Old Economy players plugging the gaps in their own web strategies. Remember, 50% of all (conventional) small companies fail after their first four years. The casualty rate among dot.coms - often run by inexperienced managers - is bound to be as least as great.
Second, there will be consolidation as stronger companies (like the providers of free internet access) gobble up their competitors in order to secure a big enough market share to be able to charge for what they are providing. There's still no such thing as a free lunch.
Third, we may see the beginning of a fresh wave of start ups - armed with second-mover advantage - who, having learned from the mistakes of first movers, will try to build companies biologically linked to the web rather than glued on to it. It is very difficult to predict what they will be like - but some, like games companies, will use the new location-based wireless technologies so community games can be played.
Meanwhile, the problems of the B2C sector will move to the B2B area where there is bound to be a shake-out among the burgeoning electronic market places each trying to undercut the other in the internet world where the consumer id king. There simply isn't room for all of them and rationalisation is bound to take place. Nor will mainstream B2B companies selling to other businesses be immune from the shakeout in all the other sectors. Nor will they be immune from the slowing down of the US economy, the source of so much world economic growth. And if the US slowdown turns into a serious recession then there will only be one bit of sensible advice. Run for cover.
Victor Keegan
Computers
It would be hard to claim nothing happened in a market where thousands of new PCs were introduced, but most new models were indistinguishable from the ones they replaced. There was progress. Over the year, a typical £699 multimedia PC - actually £875 including VAT - went from a 500MHz Intel Celeron to an 800MHz Pentium III. The standard hard drive also grew from 13GB to 20GB.
There were some new options from the PC industry's building block suppliers, too. Microsoft published a new version of Windows, while Intel launched a new processor family. However, anyone running Windows Me (Millennium Edition) on a Pentium 4 would be hard pushed to spot the differences, except for processor speeds reaching 1.5GHz.
In other respects, the Wintel duo had a tough year. Intel sometimes struggled to meet demand for chips, leaving its rival AMD to grab market share with cheaper, faster Athlon and Duron processors. Intel also admitted it might have made a mistake by insisting on high-priced Rambus memory chips for the Pentium 4, and it is now developing support for standard chips. Meanwhile, the long-promised 64-bit version of the Pentium, the Itanium, seemed to disappear into thin air.
Microsoft suffered worse indignities as it was dragged through the mire by the US Justice Department, and its share price halved. Ironically, the fall in Microsoft's stock, which followed the guilty verdict, initiated a downturn in the whole tech market, wiping hundreds of billions of dollars off the value of IT shares, stock options and pension funds.
Threatened with break up - the DoJ wants to replace one powerful monopoly with two powerful monopolies - Microsoft responded with .Net (dot net), a new strategy that involves redesigning all its products to integrate seamlessly over the internet.
But Wintel's rivals failed to benefit, in spite of massive journalistic hype. The Linux version of Unix continued to do spectacularly well in the market for small, single-processor web servers but failed to make ground either against Windows on the desktop or Sun's Unix servers in the serious hosting business.
Apple suffered from the failure of IBM's PowerPC processor to keep up with Intel and AMD in the megahertz race, and from the market failure of its new fan-free G4 Cube computer, launched in July. It also failed to ship Mac OS X, the long-awaited Unix-based replacement for its aged desktop operating system, and the beta test version met with a somewhat mixed response.
But Apple was not the only company suffering end-of-year blues. Profit warnings from Gateway, Compaq and other PC manufacturers suggest that, at best, the PC market has failed to grow as much as expected, and may have suffered a reverse. Since most leading PC suppliers were planning to grow faster than the market, the result could be a bloodbath in a channel stuffed with unwanted products.
The superfast £999 PC that would have seemed astonishingly cheap a year ago may well cost a good deal less in another couple of months.
Jack Schofield
Handhelds
The palmtop computer market had a great year, with Palm machines invading the mainstream market. But while Palm's audience was becoming less geeky, some of the geeks were moving on to better things.
The rival with most appeal was the expandable Handspring Visor range, developed by the team behind the original Palm Pilot, rather than the disappointing Clie, which Sony launched in the US. The consolation was that both Handspring and Sony adopted the Palm OS operating system under licence, allaying fears that Palm would eventually be isolated and defeated, like Apple.
Nonetheless, the summer also saw Microsoft's hardware partners making rapid increases in sales of handhelds, albeit from a very small base. After a miserable start in 1998, Windows CE for palmtops was reborn as the Pocket PC, with colourful products such as the Compaq iPaq, Hewlett-Packard Jornada 545 and Casio E-125 and EM-500 making the Palm IIIc look both underpowered and overpriced.
In the UK at least, Psion continued to lead the way in developing handhelds with keyboards. The popular Revo, which looks like a spectacle case, was upgraded to the Revo Plus, and larger Series 7 machines were sold as notebook PC substitutes. However, the Psion Series 5 lost its distinction of having the best keyboard ever built into a pocketable computer: in September, Hewlett-Packard launched the CE-based Jornada 720 Handheld PC, which not only has a better keyboard, but a colour screen too.
The year also saw the first glimmers of what could be a new boom as handheld computer technology converges with the high end of the mobile phone business. A Pocket PC or Handspring Visor can be converted into a usable mobile by plugging in a GSM expansion module, and in France, Sagem launched the WA3050: essentially a Pocket PC combined with a dual band GSM/GPRS phone.
Microsoft also showed off a slim prototype codenamed Stinger, styled more like a conventional mobile phone. This is intended to compete against mobiles such as the Ericsson R380 smartphone based on Symbian's Epoc - the operating system originally developed by Psion for its handheld machines.
Over the year, what was seen as a simple electronic Filofax somehow turned into a combination electronic book reader, MP3 player, games console, camera and GSM phone, to the point where someone loaded the whole Top Gun movie on to IBM's new 1 gigabyte plug-in hard drive (in handy CompactFlash format) and played it on a Pocket PC.
Geek heaven? Maybe. But most mainstream buyers would probably settle for a slim monochrome Palm if it cost £99.99 or less - preferably £49.99 including VAT. The barrier to the widespread adoption of handhelds may now have less to do with specification than price.
Jack Schofield
Getting online
In a year when the rush online has barely abated (around 10 million people in the UK logged on for the first time in 2000), it is ironic that the last 12 months have been marked by the greatest dissatisfaction and confusion about the ways to get online since the net was popularised in the mid 90s.
Last year we predicted flat-rate internet access and the arrival of high-speed ADSL (asymmetric digital subscriber line) links. Both would greatly change the way we use the net, making the online experience more enjoyable and offering a boost to e-commerce. Today most users are still waiting, and many who have tried to get either have had their fingers badly burnt.
At the centre of the debacle is Britain's telephone monopoly, British Telecom. Perhaps we shouldn't have believed this year would bring much change, after the company's chairman Sir Iain Vallance likened net users to "over-exuberant children". Indeed, that was a theme they persisted with for most of the year, stalling over giving users ADSL and giving rivals access to 'their' exchanges, in order that they might provide what Britain's net community was crying out for.
Although, through the summer months, it was possible to have sympathy with Vallance's view. The thought of giving access to the nation's telephone network to eager hopefuls like Breathe.net (the 'lifestyle ISP' which got rid of 500 'heavy' users in July, and called in the receivers in December) and AltaVista (which, in June, said it had 100,000 users, but admitted in August it actually had none) appeared to be the height of folly.
But BT's consistent bungling through the year ensures they get most of the blame. Many of those users who have managed to prize ADSL from BT have been badly let down - their connections have failed to work, and support has been non-existant. Oftel, the telecoms regulator often accused of being in BT's pocket, has also finally launched an investigation into alleged anti-competitive moves by BT.
Will 2001 bring any change? The "local loop" is finally unbundled next summer, which means BT's rivals will have to be allowed access to exchanges. That should mean more choice for consumers, and lower costs.
But, after a year when Britain's internet access has been as unreliable as its trains, announcements of new services - from BT and its rivals - should be taken only with a hefty pinch of salt.
Neil Mcintosh
Mobile phones
The big disappointment of 2000 was the explosion that didn't happen. The ridiculously over-hyped Wap (wireless application protocol), phones offering mobile access to the internet, failed to catch the public's imagination. This was the fault of the media as well as the manufacturers and both were impaled on their own wish-fulfilment. Sure, there were one or two interesting applications - like share and football statistics dispatched to you more or less live - but nothing to induce punters to buy a phone primarily for its Wap facility.
But mobile phones continued their explosive growth, as did text messages, 10 billion of which were sent world-wide in August (overtaking email in popularity).
The telecommunications companies bid a staggering, and staggeringly unexpected, £22.5bn for radio spectrum licences for the so-called third generation (3G) mobile phones. These are planned to be broadband with a permanent "always-on" connection to the internet.
Unfortunately, they did this before the Wap-lash had gathered steam and before disillusionment started about the capabilities of 3G phones. By the end of the year the banking supervisory authorities were becoming increasingly worried about the stretched balance sheets of the telcos as a result of over-stretching themselves during the bidding.
Next year - in advance of 3G phones - we will see the marketing of mobiles with faster and more powerful access to the internet with services making more use of the mobile phone's ability to tell companies where in the country you are. Expectations have suddenly become very low key. This is a good thing. It means we may be surprised if things are better than our low expectations rather than being disappointed because they didn't reach our high expectations.
Although the timetable for high speed, broadband phones with powerful internet capabilities has been pushed into the future interactive, let there be no doubt that the longer-term future for mobiles is still awesome. In a few years time practically everyone in the industrialised world will have a very powerful, interactive, video-streaming consumer product with them all the time. When the technology catches up with our dreams.
Victor Keegan
Online entertainment
A year ago, Napster was unknown to most net users, and unheard of to the offline majority. But for those who had downloaded the program, which allows users to share MP3 music files across the net, the realisation was dawning that this was more than just another 'net gizmo'. Napster pretended to be all about sharing new, copyright-free music, but the reality was that it was the biggest source of pirated music on the planet, with millions of copyright tracks only a download away. Word spread fast online, and today Napster sports over 38 million users, swapping tens of millions of tracks. It has, undoubtedly, been the net application of the year, and is a warning to those who still think the net's capacity to change whole industries is overhyped.
Napster is now - finally - leading change among the music industry's biggest labels, working in the one business which had until now been largely resistant to the internet's revolutionary ways. The 'big five' started the year attempting to bottle the genie by suing Napster; by the end of the year they had realised they had better embrace it.
In November Bertelsmann of Germany signed a deal with Napster to develop a new music-download system which will allow users to pay for what they pick, while Universal and Warner announced within days of each other that they were also looking at ways of delivering their music digitally.
Net libertarians are, of course, furious, and insist big business will not be allowed to ruin the party. They reckon Napster clones will make sure music stays free on the net. The record companies could improve on Napster's weaknesses - the variable sound quality of many of its files, the unreliability of many connections and, of course, its illegality. New services which still allow users to "own" copies of tracks, but bring the costs of that ownership down, could appeal to the net's mainstream.
That is something which, by contrast, appears to have been recognised much earlier by Britain's smaller independent labels. They have been busy for most of the year with their own digital music initiatives. In October they announced innovative arrangements to allow online music stations to legally play their music, and in November they unveiled a system to encourage the indy labels to sell online. They perhaps recognise they have far less to lose on the net than the majors with their hugely-paid stars, and a lot more to gain.
Neil Mcintosh
Games
The Playstation 2 may have been the "must have" gadget this Christmas, but 2000 has been a transitional year for the games industry. The Sony Playstation and Nintendo 64 have neared the end of their lifespans, while the Sega Dreamcast has suffered as consumers waited for the Playstation 2.
The real success story has been the Nintendo Game Boy, which sold over a million last year. And, despite the market earning £1.15billion (combined hard and software sales), it's been a mixed year for most games publishers, with Infogrames' aborted takeover of Eidos symptomatic of an consolidating industry.
The biggest development of the last twelve months has been the Playstation 2. Sony launched the machine in November but many were as disappointed with the bureaucratic pre-ordering process as they were with the launch games. However, with 160,000 machines shipped to the UK, it was the largest console launch to date. Sony also chose 2000 to re-design their ageing Playstation. The PSOne, as it is now known, was shrunk to half its size as Sony geared the machine to a younger audience.
If success was judged purely on quality of games then the Dreamcast would have been the console of 2000, with titles like Virtua Tennis and Shenmue winning critical acclaim. Unfortunately, delays in setting up its online network - combined with consumers waiting for PS2 - meant Sega's market share remained low and it faces an uncertain 2001.
The increasingly Pokemon-reliant Nintendo has also had a mixed year, with sales of Game Boy hardware rocketing while the N64 has slumped. In August the company finally announced its new machines - the Gamecube and Game Boy Advance - due for release in 2001.
The PC games market has remained relatively flat throughout the year, although titles like The Sims and Who Wants To Be A Millionaire sold well.
Despite a growth in 2000, online gaming was still hamstrung by the same speed/cost problems that blight regular net access. However, the Dreamcast finally become the first console to offer multiplayer internet gaming with Quake 3 running very smoothly.
With Microsoft's X-Box due out and the Playstation 2 becoming established, 2001 promises a real upturn in the industry. In comparison, 2000 was the calm before the gaming storm.
Greg Howson
