1996 meant new vitality, new challenges, new technologies and, for some, the difficult search for a new identity - but above all, it was another year of Internet fever. If 1995 was the year the Internet captured the imagination of the IT industry, 1996 was the year the Internet dominated strategic planning as businesses of all kinds sought to answer the question, "But can we make money off this thing?"
Microsoft Goes After the Internet
Microsoft Corp. realised that the only way to turn its ocean liner around to respond to the sea change under way in the industry was to reorganise the company, setting up a new Internet-focused business unit in February. Since then the company has released a slew of products, and bought its way into the electronic commerce market with the acquisition, in June, of eShop. And, once again Microsoft finds itself standing alone while the rest of the industry tries to coalesce around a standard: It was noticeably absent last week from the new "100% Pure Java" initiative, which aims to ensure that the Web-oriented development and operating environment remains multiplatform. Meanwhile, industry watchers have declared the battle of the browsers to be a non-issue, but that's unlikely to stop Microsoft and Netscape executives from turning every speaking opportunity into a string of pot-shots aimed at the other - now, both companies are wrangling over the more lucrative intranet server market.
The most influential technology of the year was arguably Sun Microsystems' Java software. In May, it won the endorsement of a range of leading vendors including IBM, Apple Computer, Novell, Hewlett-Packard - and even Microsoft - who were among nine companies announcing at Internet World that they would license the Java Virtual Machine and embed it in their operating systems. Since then, any Web software worth its salt has been Java-enabled - this is the hot checklist item of the year.
Hardware Vendors Seek to Cash In with Net Devices
Hardware vendors figured there must be a way to make some money from the Internet explosion. Oracle - which might like to see the world shift from a PC model dominated by Microsoft back to a terminal-server model where its big centralized software can reign - put out its Network Computer specification in May, and got IBM, Sun, Apple, and Netscape on board to support it. Microsoft and Intel fought back in October with the NetPC specification and the Windows CE operating system, and managed to sign on quite a few mass-market hardware players by Comdex in November. Meanwhile, TV makers hoped that most people will prefer to do their Web-surfing from the comfort of their couch, using a remote control similar to the one that they are now using for channel surfing - but the new Web TVs may not be the Christmas blockbuster some expected.
Online Services Draw Censorship All Around the World
As the Internet and online services make it easier for all kinds of information to circulate, they have also made it easier for peddlers of illegal material to escape interception by authorities. Governments in many different countries found themselves facing the challenge of trying to control child pornography and other obscene or illegal material. In the U.S., the hastily drafted Communications Decency Act was too vaguely-worded to pass muster with a federal court that struck it down - however, the U.S. Justice Department has appealed that ruling to the Supreme Court. In the U.K., police put together a list of Internet news groups featuring material deemed illegal, and asked Internet service providers to block access to those groups. Despite action taken by many European ISPs to block the most offensive news groups, an investigation by IDG editors in Norway found that Digital's Alta Vista search engine was a boon for European paedophiles who, despite the blocks, were able to access their favorite child porn sites through Digital's system. How the Internet will be policed remains a controversial topic - many countries are just beginning to assemble some legal framework to handle it. Whether ISPs will be responsible - in France, two ISP company directors were arrested for content accessible through their service - or whether someone else will be deemed the gatekeeper has yet to be decided.
Internet IPOs Cool Off
July 1995 saw the red-hot initial public offering from Netscape - but by July 1996 the Internet IPO fever had broken. Investors have cooled considerably towards start-ups with lots of flash but no cash and no plans to generate actual profits anytime soon - and hipper-than-thou Wired Ventures Ltd. has had to withdraw its IPO not once, but twice.
If You Build E-Commerce, Will Buyers Come?
Like the sellers of shovels and soap who were the real beneficiaries of the 1840s California gold rush, e-commerce technology companies struck at least some gold selling systems to those who would like to make money from sales over the Internet. From IBM's Commercepoint family to the U.K.'s UUNet Pipex's DialStore Web storefront in a box, the Internet became a money-maker, at least for those selling to the sellers. And at least some users were ready to plunk down dough on the Internet, to the tune of spending US$478 million online this year, according to Jupiter Communications. E-commerce payment standards came closer to formation in October, when the Joint Electronic Payments Initiative (JEPI) finalized its industry-backed standard for processing payments over the Internet.
Apple Tries to Fight Its Way Back
Apple brought in a new CEO, Gilbert Amelio, to replace Michael Spindler in February, and Amelio has spent the year touting big changes at Apple. He hired IBM veteran Ellen Hancock as chief technology officer, and she indicated recently that the fun's over in Apple's research and development labs, where only viable money-making projects will be given the green light. Apple surprised analysts in October by posting a profit, though analysts cautioned that increases in sales or market share, the true measure of long-term success, remain unstable. Meanwhile, companies that have built their businesses on Apple's success - such as Macromedia, Global Village, and Mac clone-makers - had a tough year.
Telecoms Look to Liberalisation, Globalisation
British Telecommunications and MCI Communications of the U.S. made a bid to merge into a US$42 billion beast named Concert. Regulators have yet to bless the union, but the European Commission did give the nod to a threesome, permitting France Telecom, Deutsche Telekom and Sprint to offer international telecom services to business clients through their Global One joint effort.
What all these alliances aim to do, energized by liberalization of markets around the world, is to poke their fingers into many new pies. In the U.S., long-distance carriers made plans to enter local markets and vice versa, fueled by the Telecommunications Act of 1996, which blew away long-standing restrictions on who could serve whom.
Asian PC Vendors Move on US Market
Japanese vendors stepped up their foray into the U.S. Sony launched its own branded products stateside, while Toshiba sought to replicate its success in portables on the desktop. Hitachi., Fujitsu, and NEC also set their sights on the U.S. market, as did Taiwan's Acer Group and South Korea's Samsung Electronics.
DRAM Prices Drop
This year brought good news for PC users who can never have enough system memory, and bad news for chip manufacturers who saw their profits plunge. Prices for 4Mbit DRAMs tumbled to US$3 on the spot market in June, while 16Mbit DRAMs hit a new low of $7.50 in September. By the end of the year, memory manufacturers were rethinking expansion plans, and holding off on most new capacity except for lines that can produce higher density, 64M-bit DRAMs.
The Decline of European Manufacturers
European manufacturers were hit hard this year. As slowing growth through the first half pushed down prices and squeezed margins, industry insiders asked whether large, indigenous European PC makers would survive. In the third quarter a string of bad news sent shivers through the European PC manufacturing industry. The bad news included German retailer Escom AG going into bankruptcy, and Olivetti SpA Chairman Carlo de Benedetti resigning amid charges of accounting fraud. During the year, much of Groupe Bull passed into the hands of Asian companies, ICL passed off its high-volume PC unit to its parent, Fujitsu, and now Olivetti is looking for a buyer for its ailing PC company. As the dust clears at the end of the year, only Siemens Nixdorf Informationssysteme is left standing as an independent European-based PC maker of international ranking - and even SNI's market is grounded in one country, its native Germany.
Internet fever shows no signs of abating, and is likely to dominate vendor business strategies next year. As the number of consumers going online continues to skyrocket, almost every IT product announcement incorporates some Internet element. As many as 100 million people will go online next year, according to a study from the Gartner Group market research company. As newly liberated telecom companies, PC makers, and consumer electronics companies all seek to cash in on the rush to go online, the Internet is likely to spur some interesting partnerships and hybrid products - all aimed at the wired consumer. Convergence, a buzzword being batted around for a few years, signifying the merging of broadcast, computer and consumer electronics industries, is likely to be taken for granted.
(IDG News Bureau Chief Marc Ferranti contributed to this report.)