Will the Net Bounce Back?

There are few spectacles in business more fascinating than watching technology-industry insiders explain the world to themselves. That spectacle was on full display at this year's Industry Standard Internet Summit in late July at the Four Seasons Hotel in Carlsbad, California.

In its three-year run, the summit has provided a faithful mirror of the Internet sector's dramatic arc from boom to bubble to bust. The low-key sobriety of this year's conference offered a sharp contrast to the excess on parade last year, when the economic slump was merely a "healthy correction" and swaggering VCs and hungry entrepreneurs overran the halls, more intent on taking calls and making deals than listening to speakers.

Production values came down a notch -- basic cocktails and a buffet replaced last year's fireworks and four-course feasts. The crowd of 500 was noticeably thinner as well and was more studious than celebratory. The conference theme itself, "Answering Big Questions," reflected a new gravity.

Benchmark Capital's golden boy, Bill Gurley, and Morgan Stanley's star Internet and software analyst, Mary Meeker (looking a little worse for wear after a brutal year in the market and the press), took the stage in their recurring roles as summit hosts. Throughout, the pair walked a thin line between that classic Silicon Valley narrative of engineering a fresh start from the rubble of failure and the unshakable funk of the current economic reality. The tug between hope and gloom was best encapsulated in the first question asked, which gauged the audience's level of pessimism about the economy: A full 48% of audience members believed that "the worst is over, but the speed of the upturn is unclear," while 42% responded that "things will likely get worse before they get better." And tipping the scales, 10% thought the economy was "already on the way back up."

Gloom, Interrupted

By contrast, Microsoft CEO Steve Ballmer was almost exuberant as he took the stage -- the first in an impressive succession of A-list CEOs, including Jeff Bezos, Michael Dell, Gerald Levin, Scott McNealy, Terry Semel, and Meg Whitman -- to give his spin on this moment in the Internet economy: "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." (Or according to the murmurs in the audience: the end of one era of Microsoft dominance and the beginning of another.) Ballmer launched into a commanding talk on the future of the enterprise and the "huge untackled problems" (read: opportunities for software companies) around such issues as the integration of systems, applications, and devices; collaboration and federation among organizations; paperless work; and truly real-time transactions. In Ballmer's soup-to-nuts vision of software, the potential "to make every business more agile, empower every knowledge worker, and improve the life of every home user" is staggering. More staggering to many in the crowd was the fact that Ballmer could simultaneously herald the dawn of the "XML revolution" and its open standards while crowing about the inevitable dominance of Microsoft's expansive .NET initiative.

As the rest of the roster of big-time leaders rotated on and off the stage (literally -- the futuristic set included a revolving stage that slowly turned to reveal each speaker holding onto the podium for dear life), it became increasingly clear that big CEOs plus big questions is not necessarily a recipe for big ideas. The central theme updated Sun Microsystems's original mantra "The network is the computer" to "Business is the network." The most progressive note was sounded by Groove Networks founder and software pioneer Ray Ozzie, who described a robust, decentralized business environment powered by decentralized technology. Sun's own founder and CEO Scott McNealy skipped industry agenda setting altogether and spent his 45 minutes frothing with anti-Microsoft venom.

One CEO who showed up with some of the swagger of Internet glory days was BEA Systems's Bill Coleman. A Sun alum, Coleman's original insight was that if the network really is the computer, then it needs an operating system. Apparently, that vision made sense to the market: BEA is the fastest software company in history to reach a $1 billion run rate with more than 10,000 customers and a 250,000-person-strong developer community. BEA's success is built on a simple premise, says Coleman. If the motivating fear of big companies over the past five years was "getting Amazoned," the real danger going forward is "getting Delled." The only companies that stand a chance are those that change their business model to truly leverage the network. Forget "built to last"; the survivors are "built to integrate." And here's the sales pitch: You can't do that with the bolted-on, hard-coded "spaghetti-ware" of most enterprise technology. BEA's Web-application server promises to power organizations into the next era of networked, integrated, scalable, real-time, personalized, collaborative commerce.