Hyper-Inflated Tech Stats Grow 217% Crazier - InformationWeek

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7/31/2013
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Hyper-Inflated Tech Stats Grow 217% Crazier

The tech industry is rife with over-the-top, groundless predictions and estimates. Try these on for size.

The gaga for Glass is reminiscent of the early hype around the Segway, those two-wheeled Mall Cop electrical vehicles that were going to one day replace cars in green urban settings and ultimately change the world. Before Segway Inc. unveiled its first model in December 2001, renowned tech venture capitalist and early backer John Doerr predicted that the company would generate $1 billion in sales by the end of 2002 and thus would reach that milestone faster than any company in history. Today, Hoover's puts the revenue of Segway, acquired earlier this year by Summit Strategic Investments for an undisclosed sum, at $18.2 million.

-- To chronicle why Hadoop is the "toast of the big data era," InformationWeek published a Nov. 14, 2011, magazine cover story titled "Hadoopla!" suggesting that this promising open source data processing platform was being celebrated with a touch of irrational exuberance.

The party isn't over. A recent forecast by Transparency Market Research values the Hadoop market at $1.5 billion in 2012 and predicts it will grow at a compound annual growth rate of 54.7% (because un-round numbers convey precision) to $20.9 billion in 2018.

But as "Hadoopla!" author Doug Henschen now observes, the deployed customer base is still mostly tire-kickers; the number of companies actually getting value from data on Hadoop is unknown. "Odds are we're headed into a trough of disillusionment that will cool the 50%-plus CAGR they're expecting," he says. "It's a case of extrapolating current growth rates rather than anticipating that they will change."

-- Sometimes the industry exaggerates wildly, then pulls back to project credibility. While acknowledging the difficulty in calculating losses from global cybercrime and cyber espionage, security vendor McAfee nonetheless takes a crack at it in a July report, which breaks down "malicious cyber activity" into six components: loss of intellectual property and confidential business information; cybercrime; loss of sensitive information (including stock market manipulations); opportunity costs (such as reduced trust in online commerce); security costs (security technology, insurance, recovery, etc.); and reputational damage to hacked companies.

"Put these together and the cost of cybercrime and cyber espionage is probably measured in the hundreds of billions of dollars," $400 billion at the high end, the report states. That estimate compares with the trillion-dollar-plus estimates security vendors have put forth in the past. Former McAfee CEO Dave DeWalt said in 2007 that cybercrime -- just one of the six categories McAfee laid out in its latest report -- accounted for $105 billion in damages, a figure that was criticized by InformationWeek readers as over-the-top and groundless.

To put that $400 billion estimate into perspective, the report notes that global GDP was about $70 trillion in 2011, meaning security losses are a fraction of a percent of global income -- huge but not overwhelmingly so.

-- Social media is another sector prone to hyperbolic statements. How many people are now "active" on Facebook, more than 1 billion? OK. But 340 million on the sedentary Google+? Really?

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Meantime, companies that measure their social activity by their number of Twitter followers may be (inadvertently) exaggerating that activity. In a study whose results were published in June 2012, the University of Milan's Marco Camisani Calzolari analyzed Twitter followers of 39 large companies, finding that as many as 45% of them (in the case of DellOutlet and WholeFoods) were bots rather than humans. (Maybe those bots are gathering with the hundreds of millions of folks active on Google+ before watching the Academy Awards ceremony.)

-- Sometimes provocative predictions take on a life of their own. Ever since Gartner research VP Laura McLellan predicted 20 months ago that CMOs and other marketing leaders will spend more on IT than CIOs will spend by 2017, her prediction has become almost an industry truism, on par with Moore's Law.

McLellan's thesis is sound: Marketing's role in companies is expanding as e-commerce grows and customer-facing social and mobile platforms rise in importance. Meantime, marketing department spending on IT is rising faster than conventional IT organization spending.

But will those two spending lines necessarily cross by 2017? Couldn't a backlash against ill-conceived IT spending by marketers stall or reverse this trend? What if CIOs themselves become more marketing savvy, partnering with their colleagues rather than ceding tech-buying responsibility to them? At a recent InformationWeek meeting of six healthcare CIOs, we asked them whether their IT dollars are moving to their enterprises' marketing departments, and they all said no, not at all.

Perhaps healthcare is an exception among industries, but there are far too many extenuating circumstances to put much stock in the Gartner prediction. In fact, in an industry disrupted so often by technical and commercial innovations, leadership changes, regulatory shifts and other brute forces, forecasting and statistical estimation of any kind is risky business.

We're just scratching the surface here. Please chime in below with your own examples of tech industry statistical exaggerations, lies and damn lies.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
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jfeldman
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jfeldman,
User Rank: Ninja
8/6/2013 | 1:20:03 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
Good stuff. Charles Seife wrote a great book, "Proofiness," where he talks about the misuse of numbers, and the tendency of pundits and executives to ignore precision and margin of error, worth a read.
Reilly Kerr
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Reilly Kerr,
User Rank: Strategist
8/2/2013 | 8:15:54 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
It's inappropriate to include current healthcare IT spending in anybody's forecasting survey. Their primary motivation to spend anything on IT these days is to meet ACA ("Obamacare") requirements for adopting and using EHRs (electronic health records) -- if they want Medicare/Medicaid reimbursement. Given the healthcare sector's 10-year or so lag in technology implementation, were it not for the ACA and the emergence of the BYOD workplace, the vast majority of healthcare IT spending would be on maintenance alone and mostly for admin and other back-office uses. The irony here is that changes in healthcare delivery brought on the full utilization of EHR technologies will first be appreciated by patients, thus making healthcare IT a market advantage. Once things settle a bit, IT and marketing will argue over who gets bragging rights. They'll both be wrong.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/1/2013 | 7:30:00 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
Social network usage deserve some scrutiny. Somehow I suspect that not all 955 million users of Facebook are really as active as the company suggests. And the same can probably be said for Google+.
TerryB
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TerryB,
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8/1/2013 | 6:03:37 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
My favorite is the ROI projections when building a business case for an ERP implementation. Our company just had one very recently to justify putting in Dynamics AX in a business unit running on Access 2000 databases and a software system from 1990's still using Foxpro database which has been long out of support. You'd think that would be justification enough but, no, they predicted they would save $1 million in first year from inventory savings. And this in a company that makes superconductor wire to order for customers, they don't have any stock inventory. And even better, AX will save them $300K every year after! You gotta love it.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
8/1/2013 | 5:29:05 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
That one got me good, too.
OtherJimDonahue
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OtherJimDonahue,
User Rank: Apprentice
8/1/2013 | 5:22:15 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
A writer acquaintance of mine goes on the warpath every Oscar season over the "up to a billion people watch the Oscars" baloney. It is indeed completely baseless.

Jim Donahue
Managing Editor
InformationWeek
David F. Carr
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David F. Carr,
User Rank: Author
8/1/2013 | 5:05:12 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I always thought Facebook made a somewhat honest distinction between active users and the total # of registered users (including everyone who immediately forgot the password). But the stat is not without its own controversy http://dealbook.nytimes.com/20...
ANON1238069211759
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ANON1238069211759,
User Rank: Apprentice
8/1/2013 | 4:47:16 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I have often wondered about these hyper inflated projections myself. It is easy to jump on a bandwagon and see the "hockey stick" affect as the data is extrapolated out 10 or 20 years. I am often reminded of a funny movie (I forget which) in where a salesman has a chart of the popularity of disco music. "The popularity of disco music quadrupled between the years 1974 and 1976, if these trends continue....."
D. Henschen
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D. Henschen,
User Rank: Author
8/1/2013 | 4:44:29 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
I propose a "Hypey" award, whereby forecasts are tracked and compared with actual results. This hasn't happened (as far as I know) because you have to wait three to five years to see if these things come true. But maybe we can track down some old forecasts and then give the "Hypey" award to the forecaster with the biggest misses.
Somedude8
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Somedude8,
User Rank: Ninja
8/1/2013 | 4:27:49 PM
re: Hyper-Inflated Tech Stats Grow 217% Crazier
"Maybe those bots are gathering with the hundreds of millions of folks active on Google+ before watching the Academy Awards ceremony."
Almost sprayed soda on my monitor. One of the best lines from a tech article I have read.
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