@LARGE
Rated X, for Xtra InsightBy Scott Kirsner
The Oracle of Cambridge is up at the whiteboard, drawing a graph with a dry-erase marker.
The Oracle intends the graph to show important technology changes over the last 20 years. On this graph, the adoption of client-server computing in the 1980s and the commercialization of the World Wide Web, in 1994 and 1995, are mere twitches. What really rattles the line up the Richter scale, in 2001, is something the Oracle, better known as George Colony, founder of Forrester Research, has dubbed X Internet.
I've come here to Kendall Square, to the omphalos, to find out what's next according to the Oracle, and he doesn't disappoint.
''The Web is boring. It's difficult to use for many people. It's esoteric, not all that much better than a catalog or a book,'' says Colony. The Oracle talks fast - in a polished, not manic, manner - and his personality dances through the demilitarized zone between confidence and arrogance.
The Web was a hiccup, says Colony. X Internet, he says, will be a ''massive upheaval. The tectonic plates are really shifting now.''
Forrester's business is selling research to the world's largest firms about the impact of new technologies. And at this moment, there's a widely held feeling in the e-business groups of big companies that the Net has been tamed. Once-voracious dot-com competitors are in bankruptcy court. Companies feel they've colonized the Web, that they understand how it can help do things like acquire customers more cheaply and cut all sorts of operational costs.
So Colony has to be concerned that his clients - who pay at least $20,000 a year for access to Forrester's reports - might not need him as much in 2001 as they did in the late '90s.
Forrester's continuing success hinges on ensuring that big companies are paranoid about the future, and the havoc that technological change might wreak. It's fear, uncertainty, and doubt - as well as a desire to take advantage of opportunities - that keeps companies tuned in to Forrester missives like ''The New Reality of Online Travel: Zero Commissions.''
Placidity and stasis are not Forrester's friends. The stock, a star performer throughout 2000, sunk last week when the market started worrying that Forrester could run into the same problems Internet consulting companies like Sapient, Viant, and Scient have encountered, even though Forrester's business is different.
The issue: Just as big companies have suddenly curbed their appetite for Internet consulting to help them craft strategies and build sites - partly because of the ''tamed Internet'' idea, and partly because of an overall reduction in spending - they might soon start weaning themselves from Forrester's research, too. That's why, like P.T. Barnum seeking out a new act for the center ring each year, Colony needs X Internet.
Colony first defined X Internet - which is largely his own label for the peer-to-peer computing phenomenon - in an essay posted to the Forrester Web site last year.
''While Web communications are conducted via the exchange of pages, the new software model will use executables (programs),'' Colony wrote. ''What's the difference? Think of pages versus executables as the difference between reading a book and talking to a friend. ... You can't converse with a book the way you can with a friend. You can't cooperate with a book to perform a task. ... An executable-powered Internet is like a two-way conversation.''
For Forrester's big company clients, what X Internet means, in part, is that they'll have to start ''destroying perfectly good Web sites in favor of the X Internet.'' It also portends the Napster-ization of everything - all kinds of applications and content, not just digital music. That ought to generate sufficient anxiety among Forrester's clients to keep them turning the pages of the firm's reports, and re-upping subscriptions: What happened to the record industry could happen to us. Or worse!
In addition to leading the X Internet charge at Forrester, Colony oversees the company's growth. He says the firm will hire 125 people this year - bringing the total headcount to roughly 900 - and will open a research center in Japan by year's end. Colony has also been thinking about how to retain analysts, and here he has come up with a radical plan.
In 1998 and 1999, many Forrester analysts left to work at venture capital firms, take positions at dot-coms, or start their own companies. Turnover hit a high of 16 or 17 percent annually during the Web's heyday, said Colony.
So earlier this year, he decided that in addition to using annual bonuses and stock options to retain employees, he wanted to add another carrot. Last month, Forrester raised $20 million in a private stock offering, and it will invest the money in two different venture funds. Five million will go to a ''fund of funds'' administered by Tucker Anthony, and $15 million to Venture Investment Management Co., where an ex-Forrester analyst, Neal Hill, is a managing director.
The company will ''take back the principal and 20 percent of the returns [from the funds],'' Colony says. ''But 80 percent [of the returns] will go to key employees, who'll be able to say, `I get paid well, I get a great bonus, I get stock options, and I'm playing in venture.'''
But the problem high turnover during the Web's heyday may have solved itself without the venture action. Turnover last year, according to Colony, was back to around 8 percent, its historical average. And Net start-ups have clearly lost their allure. Kate Delhagen, a prominent Forrester voice on e-commerce who left the firm for Seattle-based Lucy.com in 1999, boomeranged back to Forrester last month.
Colony describes Forrester's involvement with the two funds as ''arm's length'' and ''almost a blind trust.'' But it raises some thorny conflict-of-interest questions.
Forrester has a sterling reputation for objectivity, especially relative to other research firms. So now, will Forrester analysts give preferential treatment in their reports to companies that are part of VIMAC's portfolio? Colony says absolutely not, and adds that every analyst signs the Forrester Integrity Policy. But one ex-Forrester analyst I spoke with says, ''[Analysts] are supposed to say something bad about a company, even though they know that if they say something good, they're going to make more money? That would challenge anyone's integrity.''
As for X Internet: Will it truly be, as the Oracle's graph suggests, a bigger boom than the Net?
The answer is, it doesn't matter. At Forrester, the job isn't to be right all the time. It's to be thought-provoking. ''No waffling - just make the call'' is the cardinal rule.
''People are more respectful when you say something definitive, even if you're wrong,'' says the former Forrester analyst, ''as opposed to saying, `On the one hand this, and on the other hand that.'''
Who ever said an Oracle had to be infallible? All he has to do is keep people coming back for more predictions.
The bots are back
The Massachusetts Electronic Commerce Association holds a roundtable discussion tomorrow night at the Newton Marriott to examine the business uses of automated software agents, or ''bots.'' The panel includes Patti Maes of the MIT Media Lab, Rob Guttman of Frictionless Commerce, Jordan Pollack of Brandeis University and ThinMail, Andres Rodriguez of Memora Corp., and Iang Jeon of Pioneer Investment Management. (Disclosure: I'm serving as moderator.) See www.massecomm.org.
Scott Kirsner is a Boston freelance writer and a contributing editor at Wired and Fast Company magazines.