I’m gazing into the crystal ball to make some predications and observations about what we can expect in 2010 in the telecom and IT markets.

1. Although we aren’t out of the woods yet, U.S. business and consumer confidence is growing and should reach a peak about the third quarter of this year. However, attempting to guess the level of corporate or consumer spending is a dicey business because there are multiple factors that go into purchasing decisions.

2. I’ve been hearing that there is pent up demand for technology (both software and hardware) that will drive new purchases in both SMB and large enterprise businesses. Regarding pent up demand for technology, my gaze says that this will only have a small impact on spending trends in 2010. We heard similar wishful thinking in the years following the technology bubble and subsequent telecom bomb of the early 2000’s. Historically, pent up demand had no impact on business spending patterns then, and I suspect it will have little impact now in 2010.

3. Lessons learned. During our recent economic down-turn both companies and consumers have learned to make do with less. As a matter of company survival, projects and improvements have been shelved or cancelled all together. The net result is that businesses have learned they can protect profits by tightly controlling the bottom line when growing the top line is difficult (back to Business 101). This means that increases in spending will be slow in 2010 and largely driven by efforts to branch out into new markets or to increase competitive advantages.

4. Products and services that help businesses and consumers save money on essential services will continue to do well in 2010. Good money can be made by those who figure out how to deliver the things we can’t live without for less than we’re already paying. For example, AT&T has recently asked the FCC on the behalf of RBOCs around the country (and itself of course) to stop maintaining the country’s public switched telephone network (PSTN). AT&T says it wants to focus its maintenance efforts towards new fiber optic infrastructure that reaches further and further towards the end customer. In the near future look to see neighborhood micro-cell sites designed to service a customer base that isn’t driving between cell towers. This type of phone service can be installed for a fraction of the cost of trenching and running copper lines between homes, pedestals and central offices.

5. The demand for DSL technologies (ADSL, IDSL, VDSL, etc.) will decrease as increasing demand for faster Internet services push beyond what copper lines can deliver even with new modulation/DSP techniques. During 2010, the preferred Internet delivery methods will be fiber, digital cable TV and satellite systems.

6. Improvements in VoIP over wireless technologies will come this year, making it more practical and cost effective to deliver last mile access for VoIP and Internet services.

7. Last mile wireless technologies with fiber runs between pedestals and central offices will be the savior for America’s aging PSTN infrastructure.

8. Wireless Internet services owned and operated by municipalities will disappear this year as the cost of maintaining such systems increase beyond what local governments can afford.

9. In 2010, VoIP is no longer considered new. This year VoIP is a mainstream technology and simply is the way phone systems and voice services work.

10. Green was good in 2009 and saved money too. Look to see green technologies such as virtualization to do very well in 2010.

11. Late in 2010, 1 gig Ethernet within the data center and enterprise will begin to look slow as manufactures release 10 gig and 40 gig Ethernet products.

12. Software applications that merge office automation with business communications (both VoIP and cellular) will gain greater acceptance in 2010. However, due to business financial constraints all that Unified Communications promises to deliver will not be fully realized this year.

These are the changes in business infrastructure and focus that I am seeing for 2010. Do you agree? What other areas of change do you anticipate in your firm in 2010?

Have you wrestled with the economics of purchasing a software application vs. paying a monthly fee to a managed service provider (MSP) for access to the application? You’re not alone. I have found that in most cases the specialization and economies of scale of an MSP delivers greater value than trying to do it yourself.

A couple examples of this for our company was in our decision to use a hosted project management solution by Clarizen and a hosted Microsoft Exchange solution by Mailstreet. For example, for us to purchase, install and manage our own Microsoft Exchange server, we estimated that it would cost us at least $10,000 in the first year alone for hardware, software licenses, installation fees and ongoing administration. Instead, we pay less than $100/mo for our employees to have access to MailStreet’s Hosted Exchange service, allowing us to add and delete users any time we need to. For those partners, contractors and customers that need email boxes from us, we simply provide them an IMAP mailbox from our hosting provider, 1and1.com. This approach has saved us thousands of dollars a year and many hours of headaches we used to have trying to manage our own email server in-house.

Our customers find themselves needing to make this same type of evaluation as they consider using our cloud-based monitoring and information management tools – a service offering we call Monitor+. We have learned firsthand that the total cost of ownership (TCO) of developing, integrating and supporting all of the components of Monitor+ over the past 3 years has been much higher than we expected… despite how much due diligence we initially did. Fortunately, we have been able to spread that cost across multiple customers over a period of years and thus we are able to offer very competitive monthly fees.

When considering all the direct costs associated with creating the Monitor+ service offering, I believe our partners and/or customers would end up spending nearly 80% more to acquire and support all of the applications that comprise Monitor+ vs. paying the Monitor+ monthly service fee we charge. When requested, we help our customers evaluate the "rent vs. own" costs for themselves, and typically they end up choosing the MSP option verses trying to develop a proactive monitoring solution on their own. Ultimately, Monitor+ frees our customers and/or partners to focus on their core business and avoid the risk of disruption of their voice and data services.

Depending on your tax situation, the after-tax cash cost to finance the development, installation and support of an integrated application platform like Clarizen, Mailstreet or Monitor+ would favor an MSP option. Since MSP fees are expensed, a growing company can essentially use the MSP’s capital. In today’s environment of tighter credit and a scarcity of cash, most companies should have a bias to a managed service or cloud computing as part of maximizing after-tax return on assets/equity.

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