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Volume 3, Issue 186: Friday, April 6, 2001
- "Analysts See Several Causes of Tech Wreck"
Investor's Business Daily (04/06/01) P. A6; Prado, Antonio A.
Analysts remain uncertain about the exact nature and likely duration of the current tech slowdown. The overall economy, they point out, seems to be headed toward a rolling recession, in which different industries are affected at different times. For example, as bad as it is in the tech sector right now, it is far worse in the manufacturing sector. In contrast, the home-building sector has seen recent growth. Analysts characterize the tech slowdown as a recession of profits, as high demand drove fierce competition, which in turn forced most companies to bring down their prices. First-quarter statistics from the tech sector paint a grim picture. In the first three months of 2001, 147 Web-based firms shut down, Webmergers.com reports. In the same period last year, five Web firms closed. Webmergers.com also reports that sales of Web firms in the first quarter totaled $2.2 billion for 184 firms this year, compared to $52 billion for 231 firms in last year's first quarter. Internet VC Watch recently noted that first-quarter investment in tech firms declined 44 percent year-over-year. First-quarter layoffs in the dot-com sector totaled 34,043, according to the firm Challenger, Gray & Christmas. Still, tech firms will hire 900,000 workers this year, reports the Information Technology Association of America. However, that represents a 43.8 percent decline from last year's hiring rates.
- "European Schools Nurturing Tech Firms"
Washington Post (04/06/01) P. E1; Drozdiak, William
Several renowned European universities are beginning to encourage their students to put the fruit of their learning to test in the marketplace, mimicking Silicon Valley, where many of that area's software firms were birthed at the University of California at Berkeley and Stanford. Whereas in the past, the most brilliant young scientists would be encouraged to go into academia, European government, business, and educational institutions are encouraging an entrepreneurial spirit. Leuven, a Belgian university, has teamed its own venture capital fund with the two largest Belgian banks and scores of experts to help students with bright ideas launch startups. The Leuven Research and Development Center has set up 20 companies begun by students since the program's inception in 1998. Europe's brightest startup stars are a result--companies such as online security firm Ubizen, data mining company Synes, and AlgoNomics, which specializes in bioengineering. The center's business development manager, Martin Hinoul, says teams usually get less than $1 million in funding and are expected to run tight budgets. Hinoul says the conservative approach is rooted in the European mindset, which cannot abide the easy-come, easy-go attitude found in American entrepreneurs. "We cannot afford failed companies because unlike the United States, there is no tolerance in Europe for mass layoffs," Hinoul explains. European investors are equally conservative, having only put $6 billion into high-tech startups in 1999. Leaders in the European Union are working to change that, focusing on university incubation efforts such as the one at Leuven as well as eliminating stifling restrictions on business. One goal of the EU leadership is to make Europe into one of the most competitive high-tech regions in the world by 2010.
- "California Faces a High-Tech Downturn"
Financial Times (04/05/01) P. 5; Parkes, Christopher
A new study by economists at the University of California at Los Angeles concludes that California's high-tech economy will face recession in 2001 and 2002. The study reports that the widespread layoffs of recent months will continue and notes an increase in the number of employees working fewer hours, often a sign of future layoffs. As further evidence of the impending recession, the study cites the state's falling home sales, dwindling trade at two of its main ports, in Los Angeles and Long Beach, and less traffic. Also, consumer confidence has dropped 40 percentage points since October, and the growth rate in personal income this year will be less than half last year's 8.3 percent. The study says the high-tech recession will feature reduced demand for computers services and products as well as associated services. Companies that are not "well-capitalized" are unlikely to survive, the study concludes.
- "Experts Defend Controversial Patents to Congress"
Reuters (04/04/01); Sullivan, Andy
Several experts told the U.S. House Intellectual Property subcommittee on Wednesday that "business-method" patents are valid and needed. Michael Kirk of the American Intellectual Property Association said, "There is no basis for excluding new and nonobvious business method innovations from protection under existing patent laws." Since a 1998 court decision let business-method patents be granted to online processes, applications have increased dramatically, from 1,300 in 1998 to 7,800 last year. Among the most well known of the new patents are Amazon.com's "one-click" shopping method and Priceline.com's "name-your-own-price" method. However, critics have charged that the patents are often given to obvious business methods that are new only because they are being used on the Internet for the first time. Although Patent and Trademark Office head Nicholas Godici neither approved of or opposed the new patents during his testimony, he told the committee that the office's efforts to make more rigorous examinations of applications for business-method patents are succeeding. The Patent Office reports an approval rate of 47 percent for business-method patents in 2000, well below the overall approval rate of 67 percent. That is still not low enough for two Democrats on the committee, Rep. Rick Boucher (Va.) and Rep. Howard Berman (Calif.), who have introduced a bill to tighten the requirements for obtaining a business-method patent. The subcommittee chair said he doubts such a bill would pass.
- "Hackers Accessed Federal Computers"
Associated Press (04/05/01); Hopper, D. I.
During a House Oversight and Investigations hearing on Thursday, it was revealed that at least 155 federal computer systems at 32 agencies were accessed by hackers last year. Sensitive information and personal data on U.S. citizens have been vulnerable, including data on Medicare's site--which has weaknesses that allow hackers to view patient medical information. The FBI is currently investigating 102 cases of illegal computer infiltrations into government systems, some of which likely have been state-sponsored. Only 5 percent to 10 percent of all federal departments use automatic security detection software, according to Tom Noonan, president of Atlanta-based Internet Security Systems, who says, "You don't have to have a high IQ in order to attack our government."
- "ICANN Pressed to Reform Outdated WHOIS Policy"
InternetNews.com (04/06/01); McWilliams, Brian
Canadian registrar Tucows is spearheading a reform effort to limit public access to the Whois database, which contains personal information of every domain name holder. Tucows has sent a letter asking the ICANN board to reevaluate its Whois regulations. Currently, ICANN mandates that the Whois database must contain up-to-date address, name, telephone, fax and email information for each domain name holder, and it must be open to the public. This has resulted in companies using Whois for mass mailings and spamming, and even has prompted a lawsuit from Register.com against Verio, which is accused of using Register.com's Whois database under false pretenses. ICANN originally mandated public access to the Whois when Network Solutions had sole control of domain name registrations and ICANN wanted to prevent a single entity monopoly of the database. Now it is outdated, argues Tucows. Privacy groups like the Privacy Forum agree, though most have divergent opinions on exactly what reform is needed.
- "Domain System Remains in Hands of the Powerful"
San Jose Mercury News (04/04/01); Gillmor, Dan
VeriSign has managed to secure its control over the .com domain for years to come through a deal with ICANN, writes Dan Gillmor. He says the deal allows VeriSign to keep the valuable aspects of its business while dropping the less valuable portions. ICANN supposedly oversees the domain name system for everyone, rather than powerful constituencies, but Gillmor says this latest deal with VeriSign shows that this is not the case. Now VeriSign can handle both wholesale and retail .com operations, notes Larry Erlich of DomainRegistry.com. "That's not good for us, and it's not good for you or the Internet community," Erlich says. Gillmore says ICANN's board decision was merely a rubber stamp, and next month the Commerce Department will likely approve the deal also. The Bush administration will probably support the deal, as it has demonstrated its strong support for big business thus far.
- "Group Praises Ruling on Copy-Protection Standards"
Newsbytes (04/04/01); McGuire, David
The National Committee for Information Technology Standards (T13) committee, which develops standards for hard drives and other storage media, this week rejected a proposal to include new Global Unique Identifier (GUID) technology in future hard drive protocols. GUID would let content companies link specific pieces of content to a specific user's computer, preventing the user from copying that content to another medium or to another computer, according to the Electronic Frontier Foundation (EFF). The EFF, which opposes GUID, was pleased by the committee's decision. GUID is "another piece of the strategy that the content industry has, to make sure the public doesn't have access to copying or to recording technology," says the EFF's John Marttila. Although eight of the T13 committee's 15 members voted in favor of including GUID in the next hard drive protocol, a two-thirds majority was required for the measure to pass.
- "Study: U.S. West Coast Cities Top Most-Wired List"
NewsFactor Network (04/03/01); Durham-Vichr, Deborah
Portland, Ore., leads all U.S. cities in overall Internet penetration, according to a new study from Nielsen//NetRatings. Seattle finished in second place, and last year's most wired city, San Francisco, came in third. Rounding out the top five were Boston and San Diego. West coast cities represented four of the top five cities. Allen Weiner of Nielsen//NetRatings notes that the top cities all have something in common. "It's the proportion of tech workers in these areas that's important for the growth. They get exposed to the Internet at work and see the value of it in their non-work lives," he says. Showing tremendous growth in Internet penetration were Philadelphia, with 40 percent growth, and Detroit, with 38 percent growth. Overall, over 50 percent of U.S. households now have Internet access, recent studies have shown, and Weiner says that could approach 90 percent within a decade, as the Internet's applications become more important for everyday living.
- "New Rules for Net Searches: Location, Location, Location"
New York Times (04/05/01) P. E7; Greenman, Catherine
Leveraging its new .geo top level domain name, SRI International has devised a method of reorganizing Web sites based on geographic location. Web sites ending with .geo would be classified according to their location, business type, and as travel destinations. "To me, it's enormously inefficient to have to search the entire Web when all you really want is information about the restaurant around the corner," says Mike Goodchild, a geography professor at the University of California at Santa Barbara. Through the .geo system, the globe would be divided into "cells," which would come in a variety of sizes depending on the amount of information a particular area generates. For example, the cell for Manhattan would have many smaller cells while Nebraska would have only a few main cells. Local Internet servers within each cell are called "georegistries." When local Web sites are registered, they would give the georegistry their latitude and longitude as well as key words that describe the site. SRI would provide search engines and other relevant sites with a program enabling them to search the .geo system. Through .geo, users could obtain specific data on local or international areas that would currently be difficult to access, according to Yvan G. LeClerc, director of the .geo initiative at SRI. Searches could be conducted in more detail through the .geo system. ICANN rejected the .geo suggestion during its first round of TLD applications because there were technical concerns that had to be worked out. SRI petitioned to have ICANN reconsider, but the latter petition was rejected as well. "Dot-geo represents a fairly significant departure from how information would be presented on the Web, and it needs more thought," says ICANN CPO Andrew McLaughlin. ICANN's next round of TLD applications might occur later this year, and SRI will again petition ICANN to approve the .geo TLD, says LeClerc. Eventually, a system like SRI's .geo system will be implemented, according to Internet experts. SRI is also doing tests on a geographically based photo-sharing system that would permit users to locate and exchange photos online.
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- "States, Localities Call for Federal Chief Information Officer"
Newsbytes (04/02/01); Krebs, Brian
Hearings on whether to create an executive branch chief information officer (CIO) were held this week by the House Subcommittee on Technology and Procurement Policy. Subcommittee Chairman Rep. Tom Davis (R-Va.) intends to reintroduce a bill he authored last year, H.R. 5024, that would create a CIO within the Executive Office of the President to oversee federal IT projects, including their budgeting and managing, which is now handled by the Office of Management and Budget (OMB). OMB officials did not warm to H.R. 5024 last year, and while Davis says he holds the same position, Davis also indicated he is willing to be practical. This week's subcommittee hearing comes on the coattails of a recent Gartner study stating that by 2004 only 50 percent of e-government programs will meet expectations. The study concluded that e-government needs a federal CIO to help focus policy on such IT issues as privacy, security, and Internet voting.
- "Technology Overspending in '90s Sowing Woes Today"
Chicago Tribune Online (04/02/01); Mitchell, Dan
As companies overspent on technology during the 1990s, they built up expectations that tech spending would continue at near 50 percent growth rates. However, now that the Y2K threat has passed and the dot-com sector has crashed back to earth, corporate executives have cut capital spending on IT. Software companies such as Oracle, which recently said it will cut its workforce by up to 2 percent, and hardware companies such as Intel, which announced 6 percent cuts, are reeling from decreased demand. Even Cisco reported it would layoff 3,000 to 5,000 of its full-time staff, the firm's first workforce cuts in 17 years. "The soft landing is not there," says Dataquest chief analyst Klaus Rinnen about the tech sector's free fall. Instead, he says, no one can see the bottom yet. Analyst Edward Yardeni says tech companies are selling their products to a glutted, apprehensive market and are propping up sales at the expense of profits. Tech spending will continue to be in a state of flux, according to a survey of 225 CIOs by Morgan Stanley Dean Witter. Of the investments that CIOs were most sure of, networking equipment, e-commerce software, and CRM applications ranked highest, whereas wireless initiatives, Windows upgrades, and consulting services were most likely to be downscaled.
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- "Section 508 Becomes This Year's Y2K"
Government Computer News (04/02/01) Vol. 20, No. 8, P. 1; Bhambhani, Dipka
Government agencies continue to work toward the Jun. 21 deadline for fulfilling the basic IT accessibility requirements determined by Section 508. The June deadline requires that employees be able to use agency Web sites with more than one sensory method. For example, a site that can only be navigated using a mouse, thus preventing those with dexterity impairments from using it, would not be allowed under Section 508. The June deadline also mandates several adaptations to hardware, including making it less difficult to operate printers and replace printer paper. The changes are not merely cosmetic--the Office of Management and Personnel in 1998 found that there were 7.2 million government workers with disabilities, including 20 percent who were visually impaired, deaf, or who had some other severe form of disability. Government IT vendors report an increase in business as the deadline nears. Web software firm Macromedia expects to double the amount of revenue it receives from government projects, and other firms, including Human Factors, Compaq, and Hewlett-Packard, have won government accessibility contracts or are offering products that could assist agencies' efforts. However, some IT vendors warn that future Section 508 accessibility requirements, such as touch-screen controls or a mouse directed by movements of the eye, will be difficult for many government agencies to afford. In some cases, IT vendors point out, the technology needed for full accessibility has yet to be developed.
- "Uncomplicating IT: Simpler Said Than Done"
InformationWeek (04/02/01) No. 831, P. 44; Chabrow, Eric
A recent survey of IT and business managers by InformationWeek found that 90 percent of respondents said the complexity of IT is greater than it has ever been. Although nearly all of the survey respondents agreed that simplicity is desirable, few vendors are working to develop systems that are less complicated than today's. Staples CIO Brian Light argues that IT suffers in comparison to other technology platforms, such as phone service, because IT must deliver many applications, while other platforms deliver a few or only one. Some observers argue that vendors intentionally make systems more intricate. Although average customers may use only 20 or 30 percent of a given application's functions, the number and range of functions within that application are what differentiates it from the competition. The more--and the more complex--the better. However, at least a few vendors are trying to take into account potential users' concerns about how easy applications and systems will be as they design new products. At Microsoft, for example, developers of the new Office XP suite are meeting with lawyers and legal aides to see how to modify some of the application's tools. Other firms are using complexity theory, a field that combines algorithms with a study of natural organization systems, such as ant colonies, to devise the most efficient solutions for complex systems. As for current systems that are easy to use, observers point to e-commerce leader Amazon.com's Web site as an ideal. Although the site offers numerous special features, users can easily navigate the basic site, find what they want, and order it.
- "The New, High-Tech Benefactors"
National Journal (03/31/01) Vol. 33, No. 13, P. 948; Munro, Neil
High-tech money is playing an important role in philanthropy these days, with an increasing amount of charitable donations coming from high-tech philanthropists. For example, Bill Gates donated $17 billion to the Bill and Melinda Gates Foundation, Intel founder Gordon Moore has donated $5 billion to the Betty I. Moore Foundation, and the Packard and Hewlett foundations have endowments valued at more than $16 billion. These foundations now rival the traditional giants, such as the $12 billion Ford Foundation, the $9 billion J. Paul Getty Trust, and the $3.8 billion Rockefeller Foundation. Also, there are many mid-sized high-tech foundations, including Quark founder Tim Gill's $260 million fund, eBay founders Pierre and Pam Omidyar's $100 million Omidyar Foundation, and Steve Kirsch's $50 million foundation. The boom in the NASDAQ stock market and the rapid growth of the New Economy is responsible for the massive amount of wealth that high-tech entrepreneurs have accumulated. However, observers say high-tech philanthropists are somewhat different from old-wealth foundations in the way they give their money away. They are not as interested in letting their descendents make the decisions about directing their philanthropy. Also, high-tech philanthropists tend to contribute their money to secular causes rather than to faith-based charities. Moreover, high-tech money tends to be apolitical, with feminist groups and environmental organizations being among the favorite targets of industry philanthropists. If anything, high-tech philanthropists align themselves with liberal causes.
- "E-biz: Down But Hardly Out"
Business Week (03/26/01) No. 3725, P. 126; Hamm, Steve; Welch, David; Zellner, Wendy, et al.
The economic downturn may have stalled or slowed down the development and implementation of e-business ventures, but many leading companies remain steadfast in their belief that migrating to the Web will allow them to reap enormous cost savings, sales volumes, and productivity gains. Some companies, such as General Electric (GE) and Enron, will not slow down their efforts or allow competitors to overtake them. "This is the moment to widen the gap as far as we're concerned," says GE CEO John F. Welch. Other businesses, such as Ford Motor, are using the slowdown as an opportunity to experiment with joint ventures and new technologies that could improve design efficiency and reduce development, shipping, and production costs. Executives such as Enron CEO Jeffrey K. Skilling say that companies that hold back on e-business initiatives as a result of the recession do so at their own peril. He insists "Incumbent companies have got to come to grips with this new technology because it is very, very powerful." But even the top players understand the need for a more pragmatic approach, so companies--Kaiser Permanente among them--are investing in efforts that will yield the quickest results. Eighty-seven percent of corporate executives polled by AMR Research in January expect to either maintain or raise their spending on Internet projects that promote customer management and sales growth, while 84 percent are planning do the same for their e-procurement efforts. On the other hand, successful e-business ventures face enormous challenges, such as shifting employee preferences from well-entrenched offline business processes to an online model; and establishing seamless, trustworthy business partnerships between companies and multiple suppliers. But slowing down is hard, especially for those eager to secure a piece of an e-commerce pie that Gartner Group predicts will total $3.6 trillion in 2003 and $6 trillion in 2004.