Wave Systems Corp. (fka WAVXQ)

[50mil_in_05]

big trends in 2005

http://www.nytimes.com/2005/02/20/business/yourmoney/20sund.html?th

As I.T. Goes, So Goes Forrester?
By LAURA RICH

ORRESTER RESEARCH made a name for itself during the dot-com surge in the late 1990's by selling research that promised to decode the onslaught of new technologies for businesses. When the Internet bubble burst, sending much of the technology industry into a long recession, Forrester was hardly immune: its stock price tumbled, along with those of many tech companies, though it has come back somewhat in the last two years.

Today, Forrester, based in Cambridge, Mass., remains a significant technology research business, exceeded only by Gartner Inc., which had six times the revenue last year. Forrester's chief executive, George F. Colony, spoke recently about current trends in technology - like radio frequency identification tags, or RFID, used to identify things like products or pets - as well as consolidation in the research field and his ho-hum attitude toward Google. Following are excerpts from the conversation.

Q. What are the big trends in 2005?

A. There are some real fires burning here. RFID in the retail space - that's a fire burning. You cannot ignore this. You're going to have to spend money, make change, change your organization, change your process, no doubt about it. On the back ends of all companies, there's a trend we call "organic I.T.," which says we're moving away from big proprietary systems toward much cheaper systems built from cheap components based on standards.

Q. Forrester estimates that I.T. spending will grow 7 to 8 percent this year. Will your company's revenue also grow that fast?

A. We're not releasing any guidance so far, but leave it at this: Hey, this increase in spending is going to help our business. Just leave it at that.

Q. But as a rule, in the past, have your revenue increases followed the increases across the board?

A. We've tended to grow faster than tech spending.

Q. How does that happen?

A. Forrester, as it turns out, as it comes out of the recession, is really a portfolio company. We actually sell now four sets of products. We sell research, we are in the data business, we sell consulting, and the last part of our business is what we call community: we have a business called Oval, which is building boards of executives worldwide whom we bring together to solve problems and share solutions.

Q. Could your clients be involved in several of your portfolio areas?

A. Absolutely. Clients who are fully engaged with us - we call them "hitting for the cycle," it's a baseball term. That would mean they buy all four from us. In fact, some do; it's probably less than 5 percent at this point, but many more are doing it now.

Q. You advise some companies that sell hardware and software, and others that rely on your advice about what hardware and software to buy. Have you taken steps to prevent conflicts of interest?

A. If a vendor becomes a client, we will tell them upfront: "Look, you will get no special treatment - zero. We are making calls as we see them." Because our value proposition falls precipitously if we do not do that. We have to make the calls.

Q. Let's talk about Google. You came out against it to some degree last year, citing competition from Microsoft, Yahoo and AOL. But Google has done well. Were you wrong?

A. This is how I saw it: that Google has three major challenges in front of it. No. 1 is competition. They have a lot of money, a lot of power and they want Google's business, so probably No. 1 for Google is competition. Problem 2 for Google is what I call "switching costs." There are no switching costs to move from one search engine to another. Before Google, I used AltaVista. I changed to Google in about 27 seconds. I will leave Google in about 27 seconds. The third problem is, Google is a fantastic technology for a page-oriented, HTML-based Internet, which is what we have today. The problem is, we're not going to stay in a page-oriented world.

Q. That assumes that Google wouldn't be able to adapt. And we're still going to need to search through all the information out there.

A. I'm just saying, if the library's changed the way it's organized, the way you search will be different. The old card catalog won't work as well.

Q. Your industry is consolidating. Your primary competitor, Gartner, recently bought META; last year, you acquired Giga. Is there enough business for you and Gartner?

A. It's like complex brain surgery. To get one opinion is probably not the right way to go. So there are two opinions to be had out there, and we're one of them. We don't care if we're the first opinion or second opinion, but there are only two to be had - and we're one of them.