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Volume 2, Issue 118: Monday, October 16, 2000
- "Here Are Six Myths That Drove the Boom in Technology Stocks"
Wall Street Journal (10/16/00) P. A1; Browning, E.S.; Ip, Greg
The once unstoppable new economy has slowed tremendously this year, and some observers say this downturn has exposed the "myths" that had been driving the tech industry's explosive growth. Since its March peak the tech-heavy Nasdaq has lost 34 percent of its value, while the Dow Jones Industrial Average, which had increased its value 200 percent in the past six years, has fallen 11 percent this year. Observers say analysts and investors expected continued sales growth in the tech industry for many more years. However, many companies, while still posting large growth, have not met expectations over the last few years, disappointing those who had priced them "for perfection." Dell, for example, suffered when it announced sales growth of "only" 38 percent in 1999. Investors also did not think the tech industry would suffer from traditional economic forces. However, demand is down, and analysts say that although tech firms may not feel the effect of higher interest rates, their customers do, which is why firms such as Apple have recently issued revenue warnings. The downturn has also exposed the overly optimistic view of Internet growth as a whole. Many tech stock values rose so high they priced themselves out of the market, while investors tired of waiting for tech firms to become profitable. Many of these investors had fallen prey to another myth of the tech industry--that prospects outweigh earnings. As investors inflated stock values on the premise that certain firms would dominate a new field, they forgot the many ways in which a market can change in a short time as new competitors emerge. Investors also cited the dominance of companies such as Microsoft and AOL, but recent antitrust issues involving those and other companies have devalued their stocks. In general, observers say, investors bought in to the idea that the tech industry, unlike every other new industry to enter the market, would not follow normal market forces. Although computer and Internet technology has become part of individuals' lives faster than any previous technology, it is not immune to market forces.
- "Recruiting Foreign Workers for High-Tech Jobs Challenged"
Philadelphia Inquirer (10/16/00) P. C8; Rothacker, Rick
The high-tech industry maintains that hiring foreign employees is necessary because of a shortage of qualified American workers, but critics argue that tech firms are overlooking the U.S. workforce and abusing the H-1B visa program to hire cheap labor. Complaining of a shortage of 840,000 workers, the high-tech industry recently persuaded Congress to raise the H-1B visa cap to 600,000 over three years. Meanwhile, labor unions and other critics say the high-tech industry is not putting enough effort into training and recruiting American workers. AFL-CIO President Jack Galodner contends that the labor shortage is a myth, and that tech companies need to offer higher salaries and better working conditions to attract employees. Meanwhile, groups such as the National Urban League and the Coalition for Fair Employment in Silicon Valley say the industry does not try to recruit minorities. This criticism is echoed by the Information Technology Association of America (ITAA), which says African Americans, American Indians, and Hispanics account for 10 percent of the workforce, but only 5 percent of computer programmers. The ITAA is addressing this problem by offering an internship program that recruits minorities over the Internet. Meanwhile, H-1B visa applications now require high-tech companies to pay a $500 fee that goes toward training for U.S. workers. In addition to minorities, older high-tech workers believe they are often passed over for jobs in favor of younger H-1B visa holders who accept lower salaries.
- "A Switch to an Alternative Internet?"
CNet (10/13/00); Livingston, Brian
A group of companies called the Open Root Server Confederation (ORSC) has run servers that handle alternative domain name suffixes to the traditional .com, .net, and .org for years, and this consortium intends to start a campaign to promote its "alternative Internet." Beginning Oct. 15, Joint Technologies will permit the registration of new domain names with ".food," ".kids," and ".ocean" suffixes, among others, says company CTO Bradley Thornton. The ORSC is an obvious threat to ICANN, which oversees the "A" root server. Network Solutions manages and maintains the "A" root server that handles all the .com, .net, and .org domain names. More than one ISP could switch to ORSC's system prior to ICANN's decision on new top level domains. The CEO of one top ISP has decided to utilize the ORSC server instead of ICANN's server, says Richard Sexton of VRX Network Services, which handles the ORSC root server. Switching to the ORSC system is simple and can be done by ISPs or by individuals on their own personal computers even if their ISP does not utilize the ORSC. By simply editing a few lines of in-house computer code, ISPs can allow customers to access the ORSC domains with all their available TLDs, as well as ICANN's .com, .net, and .org. A description of the ORSC can be found through the SuperRoot Consortium, which is a supporter of the ORSC.
- "Ageism 'Rife' in IT Industry Despite Severe Skill Shortages"
Financial Times (10/16/00) P. 9; Maitland, Alison
High-tech workers in the United Kingdom believe ageism plays a part in firms' hiring practices, according to a new survey from the Employer's Forum on Age. The survey revealed that two-thirds of high-tech workers identify 45 as the age limit for new hires, while others said the limit may be as low as 35. Many of those surveyed believe the young managers at tech firms do not feel comfortable working with older employees. The survey has cast doubt on the government's plan to allow more foreign workers to enter the country to make up for a shortage of skilled tech labor. That shortage is 13 percent in all of Europe, the European Information Technology Observatory and consultant firm International Data recently reported. Those at the Employer's Forum on Age said domestic labor could compensate for that shortage. Campaign director Sam Mercer said, "If the government and the IT industry are serious about addressing skills shortages they should change a culture that at present undervalues the contribution and experience of employees as young as 35." However, of the tech firms that responded to the survey, most said age is not a factor in hiring. These firms said they value skills and experience more.
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- "Software Jobs Taking Off in Europe"
International Herald Tribune (10/16/00) P. 8; Shannon, Victoria
The software industry appears to be growing and providing many jobs in Western Europe, according to a new study conducted by Datamonitor and sponsored by Microsoft. The study of the packaged-software industry in 16 nations in Western Europe found that the largest software employers in those countries are Microsoft, IBM, Oracle, SAP, and Computer Sciences. The software industry employed 222,000 workers in Europe last year, with about half of those in Britain and Germany. France and Ireland also have strong software industries, the study says. By 2003, job growth in the software industry across Europe will total 326,000. Europe's software job growth rate will reach 47 percent over the next four years, the study says. The software industry is also boosting "downstream employment" in areas such as Web design and IT recruitment that depend on the software industry, the study says.
- "Rep. Coble Promises to Reintroduce Database Bill"
Newsbytes (10/12/00); MacMillan, Robert
Noting that for three sessions in a row Congress has failed to pass anti-piracy protections for databases, a frustrated Rep. Howard Coble (R-N.C) promised to call attention to the issue when Congress goes back to work next year. Coble cited Congress's inaction on his Collections of Information Anti-Piracy Act as part of his concerns. "Opponents of such legislation have done all they can to prevent legislation from moving forward...so they may pirate the work of others due to the current gap in protection," Coble said. Industry groups claim Coble's bill would have stunted the growth of e-commerce. The House Commerce Committee said that Coble's bill was overly harsh and would have sent many citizens, investors, and company officials to jail for using information from another person's database. Reps. Thomas Bliley (R-Va.), John Dingell (D-Mich.), and Michael Oxley (R-Ohio) were especially critical of Coble's bill. Bliley, who is retiring, introduced his own database bill, the Consumer and Investor Access to Information Act, which was better received by the industry than was Coble's bill.
For information regarding ACM's activities related to security, visit http://www.acm.org/usacm/crypto
- "Linux Group Seeks to Enhance Portability"
InternetNews.com (10/11/00); Olavsrud, Thor
The Free Standards Group has produced a beta Linux Development Platform Specification (LDPS), backed by IBM, Red Hat, and 21 other entities with Linux interests. The LDPS was designed to avoid the incompatibility issues that have plagued the UNIX market. Although not mandated, the standards body suggests that program developers use platforms that can port to every generally accessible Linux distribution. Free Standards Group President Dan Quinlan says that the LDPS will pave the way for many other specifications and make Linux-centered application development easier.
- "Online Recruiters Fall Victim to a Downsizing Market"
Washington Post (10/15/00) P. L1; Johnson, Carrie
The market for online recruiting sites is shrinking, analysts say, as several big-name offline recruiters enter the field and the top online services purchase their smaller competitors. CareerBuilder.com recently bought CareerPath, while brick-and-mortar recruiter Spherion acquired a majority share of JobPostings.com. Reasons for the sudden consolidation of the market are clear, analysts say. "Nobody's making money on this job-posting business. It's become a commodity," says HireStrategy.com CEO Paul Villella. Job posting sites' revenue comes mainly from the subscription fees companies pay to access the sites' databases of potential employees. However, these fees are not large enough to generate profit, so many sites are adding more traditional executive and management services to complement their basic employee databases. TMP Worldwide, which owns industry leader Monster.com, now provides a screening service, which gives a company the names of three to five top applicants for a given position. Analysts expect revenue for these services to increase in coming years as demand for employees remains high and the unemployment rate remains low. Worth $411 million last year, the market could reach $3.2 billion by 2004, according to Forrester Research.
- "Russia Denounces US Approach to Domain Names Registration"
ITAR/TASS News Agency (10/14/00)
The United States permits anyone to register an available domain name even when it is the trademark of another company or a famous name, with any disputes being handled later in court, and this practice is completely unacceptable, according to Russian Federation Deputy Communications Minister Alexander Volokitin. The issue sparked a vigorous debate between the U.S. Department of Trade and his delegation, says Volokitin. The registration process in the United States "unties hands of hooligans and violators," who then have control of "their victims," says Volokitin. A global law is necessary that would take the domain names from owners who have no relationship with their domain name, says Volokitin. This method is already utilized in countries such as Finland and Israel, says Volokitin.
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- "ICANN Elects Iconoclasts"
Wired News (10/12/00); McCullagh, Declan
A couple of the newly elected individuals who will sit on ICANN's board of directors have been publicly critical of ICANN and call for major changes in the organization. ICANN's president, general counsel, and its law firm, Jones, Day, Reavis and Pogue, should all be fired, says Cisco engineer Karl Auerbach, who will represent North America on ICANN's board. Auerbach is particularly upset at ICANN President Mike Roberts. "I have rarely heard a statement from him that I believe is not laden with hidden agendas, unstated definitions, silent reservations, and secret conditions," says Auerbach. German programmer Andy Mueller-Maguhn is the other critic of ICANN who was elected onto ICANN's board. ICANN is "a public issue" and actions will be taken to ensure that its decisions and votes are more open, says Mueller-Maguhn. The lack of support that business lobbyists and special interest group members received during the election highlight how incorrect ICANN was when it thought it was representative of the Internet community, says Syracuse University associate Professor Milton Mueller. The original board members at ICANN were chosen through a process accepted by the Clinton administration, say ICANN critics, including a few Republican congressmen.
For information regarding ACM's Internet governance work related to ICANN, visit http://www.acm.org/serving/IG.html
- "Older IT Pros Struggle With Age Bias"
InformationWeek Online (10/12/00); Goodridge, Elisabeth
Despite the boom in information-technology job opportunities, many older IT professionals are having trouble finding work, observers say. Although no extensive research on this subject exists, anecdotal evidence abounds. "I've had plenty of interviews, and several times I've been perfect for the job until I've walked in for the interview," said Chuck Linn, 59. "Their faces drop. It's a sure sign I won't get the job." Observers believe the IT industry holds several stereotypes against older workers, most notably that they cannot keep up with the rapid shifts in technology. For example, most older workers learned the Cobol programming language, while most firms now seek workers with knowledge of Java and other Web-based languages. A 1998 study by the Institute of Electrical and Electronics Engineers USA revealed that the average job search for more experienced IT workers lasts six to nine months. This denies the tech industry's claim of a labor shortage, argues University of California, Irvine, professor Norm Matloff. Observers also say the problem extends beyond the recent rash of dot-com startups, which are often founded and run by younger workers, but affects even industry leaders such as Intel, which has had several age-discrimination cases filed against it. Although a June ruling by the Supreme Court eased the standards for proving age discrimination, observers say cases are still difficult to prove because of a lack of evidence.
- "An Oasis for Programmers in Bali"
New York Times (10/13/00) P. W1; Arnold, Wayne
Indonesian tech firm Sigma Citra Harmoni has opened BaliCamp, a software development office on the island of Bali. The firm believes the office will attract domestic programming talent and investment from foreign tech firms looking to outsource their software projects. Sigma is following the lead of tech firms in other developing countries, where tech firms can offer foreign companies cheap, skilled labor, analysts say. Sigma CEO Otto Sugiri believes this offshore programming market could be worth $32.6 billion, and BaliCamp itself is already estimating 2001 revenue of $10 million. The company, which offers salaries well above the Indonesian average, has already employed 80 programmers and has a large pool of applicants from which to select even more. The office has received projects from IBM, Oracle, Cisco, and Microsoft, which has commissioned BaliCamp to design a spell-checking program for the Indonesian language. Sugiri believes BaliCamp's idyllic location will attract the best graduates from nearby Java's technical universities as well as foreign managers and marketing executives.
- "Undue Influence?"
InformationWeek (10/09/00) No. 807, P. 54; Bacheldor, Beth
Market researchers, high-tech officials, and lawmakers are still struggling with the idea of how involved the government should be in regulating the Internet. For example, Nielsen Media Research CIO Kim Ross says the government should take a selective role, while U.S. Sen. John Kerry (D-Mass.) would like to see the government approach the tech sector as a potential partner in reaching any mandates. And Mark Bierman, VP and CIO of Comsys Information Technology Services says high-tech companies will reject government intervention. Nevertheless, the government has started to take a hands-on approach to the Internet. Congress is already home to some 300 Internet-related bills, the FTC has filed suit against Toysmart.com, the Justice Department has filed suit against Microsoft, and the feds are looking closely into the Napster case. Still, experts are well aware of how important the health of the IT industry is to the U.S. economy, and they realize any overregulation by the government could stifle the growth of the economy. From 1995 to 1999, the IT industry accounted for about one-third of the growth of the U.S. economy. "It's in the best interest of the economy to maintain only the lightest touch regarding regulating this industry," says Business Software Alliance CEO Robert Holleyman. Still, many observers say issues involving consumer privacy, industry collusion, and local telephone company competition mean that the government has to be involved somehow.
- "Study: Internet Requires Better Architecture to Grow"
Computerworld (10/09/00) Vol. 34, No. 41, P. 14; Cope, James
The Internet industry needs to implement the next-generation Internet protocol, improve the Internet's reliability, and agree on quality of service (QoS) standards to maintain the industry's growth, according to a report from the National Academy of Sciences. The report, commissioned by the National Science Foundation, calls for the industry to implement IPv6, a new Internet protocol that will provide an essentially infinite supply of addresses. The current protocol, IPv4, provides only 4.3 billion addresses. In addition, the Internet should be more reliable and secure, the report says, noting that many intrusion detection and authentication products are now available but have yet to be implemented. Finally, service providers need to enable end-to-end QoS on the Internet by deciding on standards for signaling, traffic classification, and priorities for various types of traffic, the report says.
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- "Women in Technology: Leaders Among Leaders"
InformationWeek (10/09/00) No. 807, P. 99; McGee, Marianne Kolbasuk
Few women work in the high-tech field, and even fewer hold executive positions at tech companies. Only 29 percent of high-tech workers are women, although women represent 47 percent of the overall U.S. workforce, according to the White House Council of Economic Advisors. Furthermore, women account for only 8.1 percent of executives at major high-tech firms, compared with 12 percent at major companies across all industries, says nonprofit research group Catalyst. Many women who reach the upper level of management hold non-technical positions in human resources, marketing, and sales, Catalyst says. For example, Deborah Willingham became the only woman on Microsoft's 16-member executive business leadership team when she was promoted to vice president of human resources. Although Willingham became a human resources executive, she had held more technical posts at Microsoft as well as IBM. Still, some high-tech companies have an above-average number of women executives. At OracleMobile, for example, three out of five executive team members are women. Women who hold executive positions at tech firms say the scarcity of women IT leaders stems from girls and young women turning away from math and science. IBM data management division general manager Janet Perna is trying to improve the situation by helping with computer camps IBM offers for K-12 students.
To learn more about ACM's Committee on Women in Computing, visit http://www.acm.org/women
- "Please Don't Call Us PC"
Fortune (10/16/00) Vol. 142, No. 9, P. 113; Kirkpatrick, David
PC makers are starting to change their entire philosophy on the way they will do business in the years to come. This change is the result of the Internet as well as the desire to improve profits. Years ago, PC makers sold their products using the gigahertz of chips and gigabytes of hard drives as selling points. But now computer makers want to market PCs as a device to get music from the Internet, while stressing cost savings, wireless technology, and multimedia. Sun Microsystems' Jonathan Schwartz says access to the Internet is what people want, adding, "So do they really want to spend all that money for a honking PC with a ton of storage, and to pay a big software company up north, when all they want to do is go to Yahoo Shopping?" With the exception of Dell, computer makers are focusing less on the nuts-and-bolts of their products. Gateway appears to be the leader in moving beyond the "box." The computer maker has plans to unveil by the end of the year a $500 gadget that will be co-branded with America Online. The Internet appliance can be put in various places around the home such as the kitchen counter. Gateway is also looking closely into using the telephone billing model to sell Internet access and related services to consumers. For example, Gateway foresees gross margins close to 60 percent by charging $19.95 a month for Internet access, compared to 15 percent on the sale of $1,200 computers. As computer makers change the fundamental nature of their business, they can expect to find new competitors in cell phone makers and videogame makers. Some observers even foresee Amazon offering consumers an access device. Although sales may surge over the long term, the landscape of the computer industry is likely to look very different in the years to come.
- "IT Pulls Back on PC Upgrades"
InternetWeek (10/09/00) No. 832, P. 10; Wagner, Mitch
PC vendors are struggling to adjust to market changes as IT managers buy fewer computers. The PC sales growth rate in the U.S. dropped to 9 percent in this year's second quarter, down from 32 percent in the same quarter last year, according to Gartner Group's Dataquest. This sluggish growth has caused Apple, Dell, and Intel to recently lose more than half of their market values, while Compaq, Hewlett-Packard, and IBM have also seen their values slide. Many IT managers say they already have all the PCs they need right now. Weak demand for Windows 2000 is also adding to the PC slowdown, says Giga Information Group analyst Rob Enderle. Some companies are also postponing PC purchases until Intel rolls out its Pentium 4 processor, slated for delivery later this quarter. Still, some IT managers are not looking for more powerful PCs, but for PCs that are easy to manage. PC makers are addressing this new purchasing trend with new offerings. Dell, for example, plans to begin offering corporations its Resolution Assistant, which provides automated Internet-based support for servers and consumer PCs. PC support is also included in enterprise systems management suites from Compaq, HP, and IBM. Despite the recent slowdown, Dataquest says an impressive 30 million professional PCs will be sold this year in the U.S. Furthermore, the need for easy-to-use systems is boosting PC demand in some cases.
- "The Great Divide"
netWorker (09/00) Vol. 4, No. 3, P. 26; O'Connor, Bob
Europe believes its lead in mobile phone technology will ultimately catapult it ahead of the U.S. in e-commerce. But although European countries feel they are ready to compete with the U.S. in the new global economy, they are not ready to do so at the expense of the fundamental political and human right to privacy. The 15 member states of the European Union (EU) are largely strong advocates of protecting the personal information of consumers who surf the Web. In fact, the EU has a national data protection agency and a personal privacy directive that prohibits companies from moving consumer data to countries that do not have data protections in place. The EU also forces member countries to create their own privacy laws. Although the EU's strong privacy measures have caused conflict with the U.S., EU and U.S. officials have settled on a provisional agreement that addresses U.S. companies that want to do business in Europe. Under the provisional agreement, U.S. companies can do business with European consumers by voluntarily committing to protect their personal data. Companies that do not choose to follow the safe harbor principle would be required to protect the data they receive from EU countries. Although the deal appears to be a victory for U.S. companies, the agreement must still meet the approval of EU member states and the European Parliament, which is not guaranteed to happen. Many opponents view the agreement as an industry self-regulation deal that lacks strong enforcement powers.