The challenges for Sun continue. News.com and Knowledge@Wharton offer advice for Sun.

Writes News.com:

In essence, technology analysts and customers say, there are two Suns: One is the financially stressed company that depended excessively on Unix servers, became bloated on dot-com sales, hired more workers than it needed and, admittedly, signed too many expensive real-estate leases. The other is the technological innovator--known for spawning networked computing and Java--that is driving the latest industry advances in hardware architectures and on-demand systems.

If the Sun of old is fading into the distance, what will the new Sun look like? Perhaps the answer can be gleaned from another large computer company that was once thought to be headed for extinction: IBM.

When sales of Big Blue's proprietary mainframe and minicomputer systems began to tank around 1993, the company poured its resources into services--rather than products--that would help customers do business. A decade later, the IBM Global Services brand is an industry powerhouse.

With its N1 initiative, Sun wants to gradually move away from being a pieces-parts supplier and become essentially a giant systems integrator--a middleman role that makes disparate hardware and software work together, regardless of brand. Sun argues that it can better manage internal systems and reduce the artificial switching costs that have dominated technologies for years, Greg Papadopoulos, Sun's chief technology officer, said in an interview with CNET News.com.

In the process, Sun will reach into a deep stockpile of technologies that it has developed for years and finally turn them into commercially viable products. Some of its inventions, such as Jini--Java-based software for linking devices over a network--and related technology Jxta have languished as Sun struggled to devise a market strategy for them.

The Economist writes about the booming spends in Asia:

All across Asia, consumers are waking up and finding their voices, or at least their wallets. They are younger than their counterparts in the West. They are also growing richer and are less frugal than their high-saving parents. Above all, there are lots of them.

Christopher Wood, emerging-markets strategist at CLSA, a Hong Kong broker, talks of “Asia's billion boomers”: in 2000 there were 1.2 billion Asians aged between 30 and 59. That will rise to 1.7 billion by 2020. Over the same period, the same age group in western Europe, and even in America, will shrink.

Asia's boomers are blessed with increasing spending power. Some 1.4 billion may, by 2020, earn at least $5,000 in today's money—the point at which discretionary spending takes off—compared with 306m now. And Asians are moderating their traditionally high savings rates (see chart). Above all, Asia's growing number of well-educated, sophisticated singles and couples enjoy a sense of confidence in their own rising living standards.

These spending patterns are transforming Asia's hitherto export-led economies. Exports and corporate investment still comprise 38% of GDP on average, according to CLSA, but governments from Malaysia to Thailand are openly encouraging consumer demand to foster domestic growth—often, pointedly, as a counter to foreign direct investment...Asia's consumers may soon replace America's as the drivers of global growth.

The Economist writes in the introduction of the survey entitled "Beyond the Bubble":

Industry revenues have steadily increased to reach an all-time high of $1.37 trillion this year, according to the International Telecommunication Union (ITU). There are 1.2 billion fixed telephone lines, and 1.3 billion people carry mobile phones of decreasing size and increasing complexity. Around 665m people now have access to the internet. Consumer spending on communications is growing faster than spending in any other category. Surely that makes telecoms a vibrant and successful industry?

It does not. Despite all these apparently healthy signs, over the past couple of years the industry has become notorious for fraud, bankruptcy, debt and destruction of shareholder value. Exactly how much money has gone down the telecoms drain is hard to quantify, but many estimates hover around the $1 trillion mark.

The post-bubble opportunities seem to lie in exploiting three main trends. The most visible growth area is the continuing rise of mobile phones, which have overtaken fixed-line phones to become the most widespread communications devices on earth. Their number is expected to rise from 1.3 billion today to 2 billion by 2007, and they are being increasingly used to do much more than make phone calls, providing new opportunities for wireless operators and equipment makers.

The second trend is the growth of high-speed or “broadband” internet access, which is booming in many parts of the world. This offers a valuable new market for fixed-line operators, once they have supercharged their existing telephone networks to make them broadband-capable.

A third promising area is in the corporate-telecoms market. As large firms look for ways to cut costs and move operations overseas, many are adopting new internet-based technologies that can interconnect regional offices cheaply and securely and allow voice and data to flow over the same network. Many operators are now overhauling and simplifying their tangled networks to ensure they can implement such “next-generation services” quickly and efficiently.

The experience of the past couple of years, says Dave Dorman, chief executive of AT&T, has demonstrated that there is more to being a telecoms operator than simply owning a shiny new network. The best prospects are at the network's edges, not at its core, and revolve around providing complex services, not merely dumb capacity. The watchword now is transformation, not construction.

News.com reports on comments by Eric Schmidt, Google's CEO:

Personalization has become an ever more important part of search, as a means to deliver more accurate results to users, Schmidt said.

The company is increasingly focusing on personalization as a means to improve its search results, with the acquisition last week of Kaltix, a start-up that builds search tools based on personalization and context.

"The primary mission of Google is to get you what you want, rather than what someone thinks you want," Schmidt said.

WSJ writes:

There's a new gold rush in telecom, and it's reshaping an industry still staggering from the collapse of its huge bubble of the late 1990s.

All over the industry, large and small players are working on ways to send calls over the Internet or another data network, with potentially big savings for consumers and companies alike. The technology, known as VOIP (voice over Internet protocol), was introduced to the public in the mid-1990s, but it wasn't ready to deliver many of the new efficiencies and services that its backers promised.

Now many of the kinks have been worked out, and demand is booming for the service. Sales of Internet phone systems to businesses are expected to more than double this year, even as most capital spending on telecom equipment remains stagnant. And the service is winning lots of fans in the residential market, as cable companies offer Internet calling over their own networks and a host of tiny start-ups offer low-cost, or even no-cost, plans.

Currently, VOIP accounts for less than 3% of global voice phone calls, according to an AT&T estimate. But a number of trends are working in its favor, say industry executives: the boom in demand; the evolution of the technology, which permits companies to offer services beyond the reach of conventional phones; and the spread of broadband connections, which make VOIP much easier to use. Given all that, some industry executives predict that VOIP will eventually replace the circuit-switch technology that telephone networks have used for more than a century.

Optimize has an article by Larry Kellam. the director of supply-network innovation at Procter & Gamble: "At Procter & Gamble, we're working toward a vision we call 'the consumer-driven supply network.' That differs from our supply-chain strategy of the past in two significant ways: It puts the consumer first, and it envisions a network rather than a chain. All the work we've done until now to improve our supply chain focused on the supplier first—which means we've been applying a cost mentality to the problem. Now, we're putting the emphasis on serving the consumer. And whereas a chain connotes handoffs and time delays, the consumer-driven network will operate with real-time data and all network participants working to add value for the consumer."

The five elements of the supply chain discussed are: real-time demand information, collaborative planning, produce-to-demand manufacturing system, dynamic replenishment and distribution and the consumer-driven supply network.

Bill Gurley writes about the consumer electronics industry:

Two critical dynamics are occurring in the consumer electronics industry as a result of digitization, and both unfortunately lead to commoditization. The first: Semiconductors are increasingly incorporating the majority of the features and functionalities by which any manufacturer would differentiate their product.

The second key dynamic mirrors the binary code that underlies all digital goods. The cold fact of the matter is that most digital goods either work or don't work. You lose the subtle continuum of quality that exists in an analog world. The reason relates to the first dynamic in that most of the "value added" is now at the semiconductor level. The complicated motors and servomechanisms that inherently led to quality differentiation are slowly going away.

With product differentiation on the wane, distribution will play a greater role.

As we look toward the future of the consumer electronics industry, the digital hand will ensure two realties. First, consumers will be blown away by the incredible products they are able to buy at shockingly low prices. Second, companies will be blown away by how incredibly hard they have to work in a shockingly competitive industry. Never forget that the undisputed leader of the PC industry has a supply chain and distribution advantage, not a technological one.

SMEs in emerging markets (SMEEMS) are caught in two traps: a technology trap and a marketing trap.

Here is how the technology trap works. SMEEMS spend little on technology. Therefore, they tend to not be able to use the most optimum solutions for much of their business. Personal, group and enterprise productivity is not able to benefit fully from the use of IT solutions. Hence, their growth tends to be slower. As a result, they are also unable to invest in the new technology solutions which could help put them on the fast track.

The technology trap hurts SMEEMS in another way. An application like messaging rarely works well if only a few people in the organization use it. And yet, that is precisely what happens because computers are either shared or not available to everyone in the enterprise. The result is that even the few applications used are not very effective. So, even the technology used is sub-optimal.

For SMEEMS to break out of the technology trap, the goal should be to make a connected computer available to every employee in the enterprise. For this to happen,
they need cost-effective, whole solutions which can show quick return on investments. For example, if computing (hardware and software) and Internet connectivity could be provided at a cost of Rs 700 (USD 15) per employee per month, then it may be easier for the SMEEMS to justify the investment with the reasoning that even if the productivity of their staff goes up by no more than 10% (assuming minimum salaries of Rs 7,000), then the payback is immediate.

The marketing trap comes about because SMEEMs spend limited money on marketing (ads, PR, branding) which limits their reach to potential buyers which in turn limits their new business opportunities. The products and solutions are there, what is missing is the knowledge of who it can be useful (the prospects). The options are few - build a direct sales team or set up a channel. And then, perhaps back it up with some advertising - which is very expensive. Of course, if there was enough business being generated due to the ads, it would be another story, but in most cases, that does not happen because SMEEMS typically do not indulge in repeated advertising. The result: SMEEMS face limited growth because few prospective buyers know about their solutions.

This then is the challenge before us: how can the new innovations and technologies that are being created be applied to SMEEMS to get them out of their technology and marketing traps, and on the growth path. This is at the heart of where I believe the next opportunities in technology lie. The SMEEMS comprise the “invisible market” of technology – not only are they SMEs, but they are in located in the world’s emerging markets, far away from the rich markets of US, Western Europe and Japan.

Next week, we shall see how new technologies can help create an alternative technology and marketing platform for SMEEMS.

Next Week: SMEs and Technology (continued)