'Tech bubble,' disruption or something else? Name this era

Believe it or not, while we are clawing our way out of a tough recession, and unemployment remains at high levels (even higher in Silicon Valley), some observers are daring to wonder if another "tech bubble," similar to that of the dot-com boom of the late 1990s, is emerging.

It was less than a year ago that we pondered the dearth of start-up capital for new innovations, citing efforts by larger, established companies such as Intel and Microsoft to go in and prime the pump with their own support and seed money.

Now, there are reports that venture capitalists are going into a frenzy over Web-based businesses that advance user experiences within their social graphs. The New York Times’ Heidi Moore took note of the rise of deals and mergers flourishing across the tech industry landscape, and opines that we’re entering a “tech bubble."

“Is the world ready for another Internet bubble? Ready or not, it appears to be coming. In fact, it may already be here. And it seems to look, not surprisingly, like the last Internet bubble. (Well, maybe with fewer sock puppets.)”

This looks like a bubble because of all the technology deals out there, she says — 5,100 so far this year, compared to 7,007 at the peak of the dot-com boom in 2000. (Based on Dealogic data.)

Readers, do you see evidence of a “tech bubble” from where you sit?

NYT’s Moore also quotes venture capitalists John Doerr of Kleiner Perkins Caulfield & Byers and Fred Wilson of Union Square Ventures. Doerr said at the recent Web 2.0 Summit that the emerging boom (he refused to call it a “bubble”) is being driven by innovations in smartphones and social networking. Doerr calls this the “third wave of innovation” — the first two were PCs in the 1980s and the Internet in the 1990s.

Doerr didn’t mention cloud computing by name, which I consider just as revolutionary as the PC and Internet revolutions, and is the enabler of the third wave. IT infrastructure costs low and cheap — with other resources such as the collaborative and production sites — is paving the way for an explosion in entrepreneurial activity. Unemployment is high right now, and there are many, many, many professionals who see the startup route as a more sustainable alternative to seeking full-time employment. With this confluence of underutilized skills and cheap resources — the DIY economy — we may be on the verge of an explosion in entrepreneurial activity in the decade ahead that will rival anything we’ve seen before.

There’s opportunity everywhere you look — not just in the sexy social graph startups. Introducing new approaches such as social media and cloud resources, can add new energy and add new avenues of growth to even the most traditional business models. The US government, with its huge bureaucracy of agencies with legacy systems, is attempting to remake itself in a leaner, more agile model. (Consider the creation of Apps.Gov, intended to promote an "app-store" approach to federal IT procurement.) Thanks to cloud and social networking services, there never has been a better time to take well-worn, tired ideas and apply new thinking to them. Think about what Amazon did to bookshops, and Expedia to travel agencies.

There may be a tech bubble emerging, but also boomlets as well — consider the rise of storage systems for cloud computing, observed by Derrick Harris at GigaOm. Harris points out that tens of millions of dollars in venture capital funding is now flowing into this market segment, and hundreds of millions will be spent on cloud storage over the next few months.

As Harris observes:

“Cloud storage represents a major opportunity for organizations because it lets them store terabytes of data without paying to build and maintain traditional systems. For new web-based startups, cloud computing might fill the entirety of their storage needs –- primary, backup, archiving, whatever. For more traditional businesses, much of the value lies in backing up primary data and archiving relatively low-value data for compliance reasons.”

Harris also cites 451 Group research that projects that cloud-based storage will account for nearly 40% of the $1 billion core cloud infrastructure pie in 2010 — a market expected to quadruple in size over the next three years.

Information in this piece cross posted (here and here) with my ZDNet "Service Oriented" blogsite.