BusinessWeek's Hamm: Recession harms Silicon Valley's ability to contribute, but helps cloud computing

Believe it or not, there are still people who get paid to watch and report on the ins and outs of Silicon Valley. They see a lot of what's going on and probably think that those of us in the business are alternately drivers of a pretty interesting part of the global economy -- and in need of therapy. (Example? How about Larry Ellison's most recent anti-cloud computing rant and the flurry of commentary that followed.) But such dynamics come with the territory.

Steve Hamm of BusinessWeek is one of the guys who has been on the case for years. I met him through my work with Cassatt and have followed his work about the goings-ons in the Valley closely. With the economy still struggling to find its footing (certainly on the job front) but the buzz still at full volume about cloud computing, I thought some of his thoughts would be a useful contribution to the dialog here. He's been in the middle of some heated discussions on these topics. Plus, I find it's always interesting to interview the interviewers now and again.

If you don't know Hamm, he has been writing about the tech industry for 20 years, first in Silicon Valley and now in New York City. At BusinessWeek, he covers innovation, globalization, and leadership. He's also the author of two books, The Race for Perfect, about innovation in portable computing, and Bangalore Tiger, about the rise of the Indian tech industry.

Jay Fry, Data Center Dialog: You've been watching Silicon Valley and its cast of characters quite closely for a while. You've also had a chance to watch the economic downturn's impact on the Valley. What do you think will be of lasting importance in the way this recession is playing out compared with previous ones -- or even compared with early predictions about how this one would proceed?

Steve Hamm, BusinessWeek: Because it's so cheap to create Web 2.0 companies, and because most of the services they create are free to the consumer, this recession has had no discernible impact on creativity and use growth in social networking and social media. However, I believe that the funding squeeze, paucity of IPOs, and risk-aversion among venture capitalists has caused a slowdown in innovation in other areas that need attention -- green technologies, for instance. So while this recession hasn't had a devastating effect on the Valley and innovation, like the dot-com bust and '02 recession, it has harmed the Valley's ability to contribute as much as it could to solving the world's systemic problems.

DCD: Your BusinessWeek cover story back in December featured some big names (like Andy Grove) questioning whether Silicon Valley has the big, long-term thinking these days to deliver major, technological breakthroughs, rather than just incremental improvements. Do you think 2009 has provided evidence one way or the other?

Steve Hamm: I don't think much has changed. While IBM continues to invest aggressively in fundamental science-oriented breakthroughs, HP has narrowed its scope. Start-ups seeking money to do deep, long-term, transformative work continue to have difficulty getting funding.

DCD: Last month you blogged about the effect that consolidation is having on the IT industry and Silicon Valley entrepreneurship in general. In your interviews for the article (with senior Valley execs Bill Coleman and Craig Conway), you heard opposing views: that consolidation will be very tough for vendors -- or that the possibility of acquisition will still inspire start-ups to invent, despite a mostly dry IPO market. "I'm looking for some smart and brave CIOs to begin to experiment with start-up technologies again," you said, "--and get the innovation stream flowing again." Have you seen these brave CIOs yet? What do you think the increasing consolidation in hardware, software, and IT service providers means?

Steve Hamm: I found a few brave CIOs this year. They include the people who were aggressively embracing the combination of cloud computing and mobility, whom I wrote about in my story, "How Cloud Computing Will Change Business." They include: Donagh Herlihy, chief information officer of Avon Products, and Todd Pierce, vice-president for information technology, at Genentech North America. These guys aren't taking big risks on unproven technology. They see ready-for-primetime technology that's really useful for them and deploy it widely and quickly.

I think the continued consolidation of enterprise technology providers gives IT purchasers fewer choices, less negotiating power, and less innovation.

DCD: Have you seen any truly innovative business concepts or technologies appear on the scene despite (or because of) the downturn?

Steve Hamm: I think one of the potentially most powerful technologies that has advanced in spite of the downturn is using mobile phones for banking in emerging nations. There are a lot of pilot programs underway. Once this stuff gets widespread, it has the potential to transform the economies of poor nations.

DCD: What was the thing that caused you to think that cloud computing was worthy of BusinessWeek coverage?

Steve Hamm: It's the newest iteration of Internet computing, and will make it easier and cheaper to put the full power of computing in everybody's hands.

DCD: In June's special report about cloud computing, you mentioned that this "may be the largest growth opportunity since the Internet boom," but that it's going to take a while. Some have speculated that cloud computing might be the innovation that comes out of this downturn. From what you've learned covering the topic, what's your view on the evolution of cloud computing and what its impact might be? Has it lived up to its billing so far?

Steve Hamm: I think it has lived up to its billing so far, through there still is a long way to go. Adoption of SaaS by businesses has accelerated during the downturn, as companies look for ways to do more things with technology while avoiding capital spending as much as possible.

One of the most important things to get done by the industry is to assure that individuals and companies can easily shift from one cloud service provider to another without undue stress. No lock-in! Efforts are starting along these lines, but they could get bogged down by the desire of companies to gain profit advantages through using proprietary technologies.

DCD: How difficult is it to pick up a relatively technical topic and write something for the BusinessWeek audience? After that June special report on cloud computing, for example, I saw criticism from industry insiders that some of the examples you used were not actually examples of what cloud computing actually does. How do you approach complicated, nuanced, or -- like cloud computing -- ill-defined technical issues?

Steve Hamm: I don't write about the plumbing of technology, so it's not hard to make something accessible to our smart and aware BusinessWeek readers. The critiques of my story were silly. My critics didn't seem to be able to register the fact that the story was about the melding of cloud computing and mobility. Also, they were hung up on narrow technical definitions while I was writing about broad shifts in the computing landscape. My advice: Get a life.

DCD: What's the relationship you generally have with the technical press and industry analysts? How much do you rely on them to vet technologies or trends before they get your attention?

Steve Hamm: I don't read trade publications very often, though I respect the best of them. I do talk to industry analysts frequently and respect many of them. Important technology shifts usually come to my attention through meetings with the innovators themselves. They (actually, their PR people) know what I'm interested in and e-mail me asking for meetings.

DCD: When I was last at your offices, the outlook for BusinessWeek (and journalism's current business model) seemed pretty bleak to me. How are things looking for BusinessWeek at the moment? Do you think there's a solution to "reset" the business of journalism that can work financially? How do you think you and your peers will come through this all?

Steve Hamm: BusinessWeek is being sold by McGraw-Hill and its future is very uncertain. The business model for serious business journalism, especially in print, is under assault. The search for truth by professionals is very expensive, and isn't supported by current print or even online revenue trends. I think that eventually new business models will emerge that support serious journalism, but I don't see them yet. If you think of something that will save journalism, please send me a note.
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Thanks to Steve for spending the time to do this interview. Many of the issues discussed here will obviously continue to have a big impact on businesses -- and the IT and data centers supporting them. One of the more interesting angles to think about is that decisions being made now, under the duress of a deep recession, could play out over a vastly different backdrop as economic conditions change. Cloud computing has the chance to help shrink the time it takes a business to respond as the economic climate shifts, but only if an organization's IT department has made significant progress toward adopting this new operational model. And, of course, cloud computing needs to do what it has promised for each individual customer.

In any case, I'm pretty sure that all of this will continue to give Steve and BusinessWeek plenty of things to cover for as long as they can navigate these same rough waters themselves.

You can find Steve Hamm's Globespotting blog here.