Seven years on(line)

The past year has seen Net hype turn to Net hoplessness, but the story is just beginning

The past year has seen Net hype turn to Net hoplessness, but the story is just beginning

During the seven years of Getting Wired's existence, it has become something of a tradition to review on each anniversary the events of the preceding 12 months. Last year I noted the clearly discernible beginnings of a backlash against all things Internet, but few could have foreseen at that time that the dotcom downturn would have become so steep or so profound.

Against that background, it was noticeable during the past year that the powerful got more powerful. The AOL/Time Warner merger finally went through, creating an online behemoth, while Microsoft has emerged from years of antitrust investigation remarkably unscathed, and can happily launch a new iteration of Windows that integrates even more Net functionality into the operating system.

The flip side of this gigantism was that the small and the weak went to the wall. This had a particularly brutal effect on Internet start-ups, many of whom soon ran out of money. It also affected some of the brightest hopes in the open source sector, whose business models looked as dubious as many of the other dotcoms, whether justifiably or not.

One unfortunate consequence of the flight of venture capital away from Internet start-ups is that innovation is languishing. New ideas from unknowns are viewed with suspicion, and established companies are too busy battening down the hatches to engage in anything really novel.

Even an apparent exception to this, Web services, is actually a confirmation of the trend. Apart from the fact that the underlying technologies are still extremely vague - suggesting that Web services are the product of marketing rather than engineering departments - the whole thrust of the idea is about bolstering flagging sales through recurrent income from services.

In Microsoft's case, there is an ulterior motive. By moving the goalposts in this way, it hopes to steal a march on the ever-advancing open source movement.

Despite the troubles of many free software companies, open software continues to make significant gains, especially in the server area. This apparent paradox is explained by the heavyweight backing that companies such as IBM and Hewlett-Packard are offering, particularly for GNU/Linux. That is, the actual code of free software continues to thrive, whatever happens to the companies trying to make money from it.

This resilience offers a glimmer of hope in an otherwise gloomy online landscape. For it suggests that the Internet - an open source project well before the term was invented - will continue to grow and advance for the same reasons that free software keeps moving forward. Both are products of gifted and generous engineers who are happy to work unreasonable hours on exciting projects for love, rather than for the share options some start-up dangles before them.

Many of the dotcoms that have disappeared or are in trouble deserved to fail. They were simply riding the huge and often excessive enthusiasm the Internet generated in the mid-1990s. It was clear to all but the most wilfully obtuse observers that the multi-billion-dollar valuations placed on some companies were, and always would be, totally unjustified. But while the cyber gold-rush was in progress, nobody wanted to spoil the fun.

It was, after all, good while it lasted. The computer industry flourished mightily as it supplied hardware and software to the new start-ups. Consultants, programmers and Web designers were in such demand that they could command premium rates and outrageous perks. Even companies only peripherally engaged in the online world frequently benefited from the halo effect.

Since so much of this was based on a collective suspension of disbelief, it was unfortunately inevitable that it would one day vanish. The tragedy, of course, is that after the Net hype has come a kind of Net hopelessness. People have swung too far the other way, and are now prematurely writing off this key technology altogether.

Against today's dismal background, it is important to keep a sense of perspective. An era may have ended, but the Internet story is still only just beginning.

Next week: Dotbiz

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