Editors Note: January 15, 2001

By eweek  |  Posted 2001-01-15

Some markets never get off the ground, while others get off the ground so fast they dont allow solutions providers to recoup their investment in people and training.

A classic example was the computer-aided software engineering market, which was so slow to get real products out the door that it was eclipsed by simplified modular code development—despite billions of dollars of investment by some of the industrys biggest guns. That was a decade ago, and since then, most companies have been reluctant to sink huge sums of money into any long-term project for fear they may not have time to finish it.

But theres a different kind of phenomenon at work these days. The free flow of information and the rapid proliferation of hot new products make it increasingly difficult to build up enough expertise before a field hits commoditization.

Fields like data mining, which have been promising huge returns for at least five years, are headed down this well-lit highway. Six months ago, a consistent message out of aspiring ASPs was that a big part of the opportunity was in gathering trend information about customers and selling it.

They may never get that opportunity. It doesnt look as if anyone is going to gain that kind of critical mass anytime in the near future. Many solutions providers will offer hosting services of some sort, and probably turn a profit out of that business, but none of them will have the volume necessary to define market trends.

That was the hidden agenda for pure-play ASPs, but they still arent profitable and they arent growing nearly as fast as they expected. Moreover, with the stock market gyrations, investors are far less patient about the time it takes to achieve profitability than they were 12 months ago. Throw in some concerns about privacy, and you have the makings of a market that will have a tough time living up to its hype.

Ditto for the wireless services market, which is headed in the same direction. While there will be mountains of work on the back end, integrating wireless data and voice with their hard-wired counterparts, the front end is getting flooded with cheaper services. Theres a reason most telcos are in trouble these days.

The service provider market has always made the bulk of its profits on back-end integration with new technologies, and thats where the money will remain most consistent. That requires a strong partnership with your customers, and it requires a focus thats not always easy when stories appear about skyrocketing Web integrator stocks and 25-year-old dot-com millionaires.

After a wild five-year ride, the party is over. Its time to go back to your knitting.

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