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The end of tech glory days

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In the realm of reminiscence, most of us can recall those iconic “popular” kids from our school days. They seemed to effortlessly navigate the social strata, exuding charm, wit, and a flair for exaggeration. Yet while their allure was undeniable, their journey beyond high school often led to a reckoning with reality. Curiously, a parallel narrative unfolds within the dynamic landscape of the tech sector, colloquially known as Silicon Valley.

Take, for example, the move of enterprise applications to the cloud. Virtually every prediction regarding cloud migration (in a nutshell, “Everyone will move to the cloud”) has been wrong. Most enterprise applications remain on-prem, and there is no sign they are moving anytime soon. When we peel back the layers of the cloud onion, the reality is that it does have some benefits over on-prem computing. Still, the real driver is that yearly subscription models are far more profitable for technology vendors than one-license deals.

The relentless push for cloud computing has far more to do with its lucrative economics than its impressive technology capabilities, and customers have gotten wise to it. Hyped to the max, the tech sector has been telling us that it is uncool to run your applications on-prem, and that everyone is moving to the cloud to be where it’s at. The messaging worked to some degree, but recently, in Europe, due to a public dispute, SAP had to reveal how much of its customer base and revenue came from its cloud-based business (theregister.com/2023/11/30/sap_cloud_innovation_worries). The fact is, it was not that much. Despite decades of a cloud-first approach from the company, its customers are perfectly happy where they are.

GenAI hype and tech bubbles

The hype surrounding GenAI mirrors the exaggerated tales of yore. While vendors tout its omnipresence, its practical application remains limited to mundane tasks such as document summarization. The disparity between perception and reality underscores a broader trend within the tech bubble—a disconnection from tangible outcomes. Indeed, Silicon Valley’s once-glamorous facade is showing signs of wear. Mounting scrutiny from policymakers, consumers, and businesses, coupled with investment stagnation, has punctured the bubble’s aura of invincibility. Incidents such as the chaos at X, formerly known as Twitter, after the ownership change, dangerous accidents involving self-driving vehicles, and the widely publicized hallucinations produced by GenAI products such as ChatGPT only erode trust further.

In saying that, I am biting the hand that feeds me, but things haven’t been right in the sector for quite some time. Though technology is impressive at times, it is often divorced from reality. This year, I have been spending quite a bit of time in Silicon Valley, and one conversation I had with a chief product officer is reflective of the more significant problem. He told me about a costly new product his team built and launched last year that has yet to sell well. He told me that the entire concept for the product was developed internally, and everyone within the company was excited about it. Still, when it hit the market, they discovered that nobody outside of the firm and friends of its employees cared about it. That kind of cliquey thinking played a significant role in the dot-com bust 20-plus years ago, and it has to change and be challenged.

There are some signs that things are starting to change. At Deep Analysis, our clients are getting ever more specific in the advice they ask for, drilling ever deeper into real business and industry needs rather than simply guessing. The question will be whether things change fast enough.

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