Making Connections

Fashion and International Intrigue

By Rich Tehrani, CEO, Group Editor-in-Chief, TMC  |  September 05, 2013

Many believe wearable technology will do to tablets and smartphones what it did to laptops and PCs. There is certainly a high probability that, at a minimum, today’s mobile devices will lose large amounts of share to computers you wear. The problem for tech a company, however, is making a computing device you want to place on your person. Some believe Google’s Glass product is too ugly to wear, for example.

This explains why Google is working with Warby Parker, and why Apple (News - Alert) just hired Yves Saint Laurent CEO Paul Deneve to manage “special projects.”

It seems highly likely that Apple is working on a number of wearable technologies such as the much-rumored and recently trademarked iWatch.

TMC (News - Alert) on July 24 and 25 launches Wearable Tech Expo in Manhattan, and it will be very interesting to hear what the industry thinks about this Apple news.

I would be remiss if I didn’t also use this space to also talk about the NSA Prism program, which dominated the news, and many personal conversations, this summer.

Now that the world is aware of the Prism program, through which there seems to be unfettered access to the servers of American web firms, I believe we can expect a brave new world of communications and technology competition.

Although it isn't accurate to say there is free trade in the world due to tariffs and fees imposed across the borders of various countries, for the most part, companies easily can sell their wares across the world without having to worry about excess nationalism.

Yes there are exceptions, but over time, consumers worldwide are OK with buying products from companies located virtually anywhere. Perhaps this is best exemplified by the popularity of American cars in China and the popularity of German, Japanese and recently Korean cars in the U.S. This situation may change in the future as heads of state across the world are beginning to advise their citizens to stay clear of American tech companies if they don't want to be snooped on.

This, of course, reminds many in the U.S. of how difficult it has been for Huawei (News - Alert) to do business with carriers in the U.S. because the government isn't too keen on having potential backdoors in their communications networks which China could potentially use to eavesdrop.

In fact, German Interior Minister Hans-Peter Friedrich this summer issued a blunt warning to avoid American websites while speaking with reporters in Berlin. "Whoever fears their communication is being intercepted in any way should use services that don't go through American servers," he said.

"The Googles and the Facebooks, I don't know how they cope with this issue," said Gary Hufbauer, senior fellow for trade and economics at the Peterson Institute for International Economics. "There will always be that suspicion."

This is not only a challenge for these consumer-facing companies but those courting businesses – Amazon, Rackspace (News - Alert), Salesforce, etc. The international threats to U.S. tech firms could grow quite rapidly if countries become more nationalistic in their purchasing decision as a result of the Prism leak.

There is good and bad news for customers if this initial sentiment becomes a trend. On the plus side, companies with monopolistic strangleholds on the market like Amazon and others will see stronger competitors emerge. This is the case because as Amazon's cloud solutions have grown in size, it has been able to lower prices based on economies of scale. If they lose share to others, they won't be able to use pricing which others in the market may consider predatory. The downside is, these companies may lose share not because of better competitors but because of something that is beyond their control. This hurts employees, investors and the U.S. economy.

It is too early to see if any serious market share will be lost. In some cases like Facebook (News - Alert) there is a critical mass that is so absolutely huge, it will be difficult to compete effectively with the social networking leader. Still, there will be damage. If there isn't, it will be miraculous. I believe this unforeseen leak will have repercussions in the tech market for years to come.

Edited by Alisen Downey

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