- Editorial Market Commentary -

June 12, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Bud Burrell) (Go to http://www.financialwire.net/?s=cmmtry for all of today’s commentaries.) — For our readers with an interest in information technology and computer-related equities, such as the iShares S&P North America Technology ETF (NYSE: IGM), the Vanguard Information Technology ETF (NYSE: VGT),  the Technology Select Sector ETF (AMEX: XLK), the Semiconductor Holders Trust (AMEX: SMH) and the iShares Dow Jones U.S. Technology Sector Fund (NYSE: IYW), here is a recent post from Bud Burrell:

At the major IT industry conference held last week, the long term debate over the future of computing was nearly settled by two events. The first event was the announcement by Google that it would no longer use Windows products. The second event was the practical equivalent of a concession speech by Microsoft CEO Steve Ballmer that they were in a position to be prepared for any “changing technology” paradigm. So what was the future envisioned by these two organizations?

The answer of course are the shifts of computing models to the long discussed “cloud computing”, in some ways a shift back to parallels to the original mainframe technology, updated for the many new technologies that have emerged in the last 30 years. Several years ago, a great presentation emerged from a presentation made to a major US IT Board of Directors about coming changes in the World. The presentation was called “Shift Happens”, and if you haven’t seen it, now in version 2, you need to watch it, and take notes, then watch it again.  If forecasts a reality of a new world that will roar out of the next 30 years of technology evolution, which will occur at an astounding speed, possibly even challenging Moore’s Law, which forecast in the late 1970’s that the speed of microprocessors would double and their cost would halve every 18 months for the visible future. The change seen in “Shift Happens” races away from that, as power and speed go exponential while prices drop exponentially. What other technologies have seen comparable increases in speed and power, with married drops in costs? Surely communications, mass storage, remote storage, server technology, light communications, and more have seen comparable changes.

If mainframe computers were partially succeeded by mini-computers, then they in turn were succeeded by different mass server farm models for storage, driving distributed processing of input, query and output tied to personal computer technologies. What is being discussed now is a quantum shift, in which the personal computer will almost disappear into an entirely new paradigm, a more profound shift than the PC revolution.

Now, all programs, data, information, images and more will reside on huge globally distributed server farms accessible by devices which will literally project images, link to printers and projectors, and provide real time personal data inputs for pennies, with prices dropping even faster than power and capabilities will increase.

Without singling out Microsoft, or Dell, what does this do to their business models in general terms? Such change will require the ability to be agile, efficient, and customer-oriented, in a way that they have never before had to face, particularly Microsoft with its enormous market share both here and internationally. What does it do their product planning? What future products will be used that don’t even exist now, not even on drawing boards?

I had an image of the legendary Malcolm X speech over 40 years ago before his assassination, in which he compared the black experience in America with the following words: “We didn’t land on Plymouth Rock, Plymouth Rock landed on us.” The IT industry as we have known it had a small pebble hit it when the PC came into being and took off like a veritable Jet. This Cloud Computing change will land on the IT world like a planet killing asteroid, throwing everything into a kind of chaos, one in which almost all prior experience and knowledge will be decimated, leaving an unrecognizable landscape whose culture will have to adapt to entirely new realities.

What else will be impacted? Certainly, the workplace can only be described as something that will exist as if created by people throwing darts blindfolded. The tests of these workplaces, many of which will have to become virtual, will involve knowledge and skills that haven’t even been projected or imagined, using and depending on people being able to change jobs like they do underwear, with no stress, and no intellectual dependence on their knowledge of a single domain before they came to their latest tasking.

I am sorry I wasn’t born a little later, as I love the process of change, and this will not be part of my life experience at a technical level. I will get to watch it, but I won’t be allowed to contribute to it. The day to day life of a worker and even more so, a manager, will become an exercise that might be compared to playing multi-dimensional chess on a spinning board in the dark. The first players won’t just suffer from this change, they may have to learn obsession like it was a Zen exercise. Actors call this living in the moment. It may be just a bit more difficult than that.

The average person of the next half century will have a new job every 3 or fewer years, and most of those jobs do not even exist now, doing things and achieving goals that can’t even be described right now. Much has been written about management of change. The kind of change that I see coming hasn’t even been described in science fiction literature. In the term of my professional life, I could pretty much cover my technical spectrum with three publications, those being Popular Science (for early previews of things coming), Scientific American (for peer review articles addressing peer reviewed science articles from other peer review journals), and Nature (for advances in the broad biochemistry arena that defines life).  Our children and grandchildren won’t have it nearly that easy.

They will have to learn to adapt and learn, even while sleeping. It is estimated that all human knowledge since the beginning of time will be captured electronically in 20 years on computer the size of a notebook able to run processors at lower wavelengths than light (2 angstroms), most possibly and probably on neural nets that learn faster than humans, Artificial intelligence redefined.

And they must recognize problems. This technology won’t be free, nor will it be without costs and dangers. Honey bees are disappearing at an astronomical rate, and many suspect it may be because of our dependence on an ocean of wireless signals that disrupt and overload their 800,000 cell brains. How much microwave radiation can the human body stand? When does it sterilize humans or compromise their immune systems?

The early adapters of this new technology paradigm face some daunting challenges. I think that they will only survive if they realize that almost everything they know, someone else knows better and sooner. Deciding how to position humans in this gladiatorial arena will be hard, gladiatorial in the sense that only the strong will survive. In a world with 12 Billion people (by 2050), how will those who can’t adapt to this altered reality be handled? Menial labor may overwhelm everyone at this end of the skill spectrum, and their only reward may be not enough food.

Prepare for take-off. It will be a trip, if nothing else.

Source: Investrend Weblogs (http://www.investrendweblogs.net/bburrell/2010/06/05/cloud-computing-lands-hard/).

(Go to http://www.financialwire.net/?s=brrllbby for other recent commentaries by Bud Burrell.)

Bud Burrell’s experience spans a diverse spectrum, including service with the U.S. Military in the Special Forces, as a Finance Officer and as a Project Finance & Accounting Officer. Burrell also pursued studies in fine arts, the Renaissance, Russian history, and Chinese culture. Following years of working on Wall Street, he worked with specialty and derivative money management consulting and research and development in IT and AI.  Since then, Burrell has worked globally with major development stage companies from the IT, energy, alternative energy, bio-pharma, and general technology arenas, as well as on counterfeiting and financial fraud scandals.

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