A Financial Collage for 2006

Introduction

We have to start with a disclaimer. This is not a Market Report, but rather an economic report [1]. This is a collage of the issues and data we used to draw some conclusions. We looked at our research from over 1,500 end user firms, as well as key economic data to come up with these views.

Unlike some research firms, who, even when trying to be bleak, come out with rosy market increase, our research shows that the economic data — markets, profits, investment, demographics and cross sector views of the technology market — don’t support overall increases in sales in all sectors. We can’t tell you about the leaders and winners in the software markets — that is the work of the market researchers. But an economic review and primary research with our subscribers becomes the underpinning of overall buying enthusiasm, as well as the potential financial stability of technology firms.

Conclusions Translation

Key corporations had a fairly good year with shareholder value, but not all companies did. Certain sectors, like Energy, Pharma/Life Science, Transportation (B2B, not consumer travel with the airlines) and Retail, obviously did much better than others	Pharma, Defense, Home Land Security and Energy are spending on tech.
Global markets continue to rise, with an emphasis on Asian companies, whose stock prices and over-all financial position looks fairly rosy.	Increase in spend on transatlantic traffic-increase in spend on things that make it better- Transportation, Trade, Transportation Operations, Port Investments
Europe is a case by case basis, with many firms seeking manufacturing capacity in Eastern Europe or Asia.	Not a good time to expand your footprint to sell here, unless you facilitate outsourcing
Venture capital investments in the US had their best year since the bubble. But the returns are another story.	Less than .5% of all business proposals will get funded. The money is there, but the ideas are not. Look for other sources of capital, unless you have previous success to boast about.
Demographic challenges will plague nations like Japan, Germany, France and other G-8 nations, forcing them to seek alternate solutions to innovation, or mandate trade barriers.	If you can help this, good luck!
Ireland, for the first time since the potato famine is seeing more immigration in to Ireland vs. out. This reflects the fact that many US firms like high tech and Life Sciences continue to outsource to Ireland,	March in the St Patrick’s Day Parade and take a trip to Dublin, a truly beautiful city in the spring!
With Gen 2 Standards agreements driven by EPCglobal, the drive to meet the Wal-Mart and DoD Mandates will continue to stimulate RFID the high tech equipment market—tags, readers, wireless—as well as relevant complementary software like middleware[2], data services and analytics[3], network solutions[4] as well as supply chain execution.	Users get a small but reputable implementer who will give them a properly scoped project plan. Get the RIGHT hardware Oh, read ChainLink Research reports on RFID. Hardware will rule – WiFi, WiMax, Routers, Readers and tags, But RFID networks will grow in transaction base and customers.
Spending on RFID will, in general, be at the expense of other spending. We did the research in Manufacturing and Retail with hundreds of companies—that’s what they told us!	Read the research! What to do with that RFID data????
SmallSmartFast applications will grow: On-Demand and sensing—RFID, sensors, etc. An explosion of applications leveraging SOA and RFID will grow and grow. The Challenge here will be free or almost free Services. (Read The Fourth Dimension)	On-Demand, Search Infrastructure softwares that make networks, grids, fabrics, wide area workflows, web management. (Read Digital Forensics)

The Data

First, let’s give a quick review of 2005 ending data.

American are still spenders, but with a flat job market — aka more debt! Business value rises, with expense continuing to be the focus, except in the US. The ongoing lesson: our stock market value tied to government and personal debt, oui?

Interestingly, the more mature capitalist nations fare much better on their stock markets. This is not only a reflection of solid sales and exports, but of market confidence in these nations’ and firms’ long term picture.

Asia, as we said, is rosier — for obvious reasons. But also, most other nations are bigger savers. It is amazing that the citizens of many emerging nations, who have never experienced robust incomes, still save! There must be a lesson here!

Europe looks like a challenging place to start a tech firm—no news there. And in the US, VC are looking carefully at business plans to ensure that the development components of a plan leverages virtual strategies—read that—outsourcing coding or manufacturing.

Also, we were fortunate to attend a review of VC performance over the last few years. Naturally, the meeting was in Palo Alto! There was a mixture of news here. The net result: there is lots of cash to invest, but you have to wonder why the VC’s will. We, on our team, still remember the days of big plays and large returns. Sadly, that is not the state of the market today.

Though the cash is there to invest, many VC’s have had poor returns over time. Certainly the VC market, itself, is ready for a shakeout. But it is hard to shut-down a fund. Where will all the Porsches, BMWs go?

The rest of Parallax View has more data on the elements of the technology markets. 2006—play or pay. It will be a pivotal year for emerging concepts. Though most large firms have not been too friendly to small tech firms, in the last few years, with the emerging requirements, they will be more open to talking. Good luck!

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[1] There are several great firms who do Market size/share reports

[2] Globeranger, Savi, Oat, etc.

[3] ACNielsen, T3Ci, TrueDemand VeriSign and other emerging players

[4] Savi, Savi Networks, VeriSign and emerging players