Information warfare: A booming business

Much of this will take time. The immediate business reaction to Sept. 11 was powerful and widespread--a dramatic shift to online communications. The initial shift to online meetings and the decline of air travel was a reflexive reaction in a period of fear. But it conditioned many people to consider the alternatives.

Obvious beneficiaries of this early trend were the online meeting companies. These companies are also early beneficiaries because the friction to adoption is low, relative to major structural and societal changes such as pervasive surveillance.

But meetings are just the tip of the communications iceberg. E-mail marketing and corporate communications are booming as well. Many federal and private officials, as well as newspapers, no longer accept physical mail, requesting e-mail instead. Letters to the editor and classified ad submissions are all going online. Other companies--from start-ups to Microsoft--have canceled gift mailers to prospective customers and partners. Who wants to receive an unsolicited package?

Some of the beneficiaries of this shift are the e-mail infrastructure companies. Latent beneficiaries also include the online marketing firms. In the medium-term, businesses are focused on the use of network security. Much of modern warfare will be information warfare, and businesses are struggling to grasp their areas of vulnerability.

We recently held a sales summit for our portfolio companies. We convened a panel of CIOs and technology buyers from the Fortune 500 companies such as Wal-Mart, Hewlett Packard and Merrill Lynch. When asked for their greatest "current pain," the answers were: disaster recovery, network security, and asset manageability.

Companies providing business security and distributed storage area networks are responding to the call. Often, the first question facing a large business is: "What is on my network, and where am I vulnerable?"

Most businesses are entangled in a rats' nest of point solutions and unknown connections that have accumulated from organic growth, extranet partnerships, acquisitions, and intermittent remote connections. Network analysis and discovery companies such as Lucent spinoff Lumeta are helping businesses unveil and graphically map their networks for vulnerability analysis.

In the long term, there are a number of technologies that take time to launch and may spur serious discussions about civil liberties. There are the technologies of surveillance, biometrics, distributed sensors, and most importantly, the software layers that integrate this emerging nervous system.

For a sense of the march of technology, consider the simple field of video surveillance. Most building video cameras send analog signals to bulky VCRs that have been adapted to record 24 hours on one tape, requiring daily physical archival storage. These systems lack digital search and pattern recognition and are used in relatively few buildings because of significant installation costs and maintenance costs to maintain a month's worth of historical records.

Enter MPEG-4 and sophisticated interframe digital compression. MPEG-4 compression allows high-quality video to transmit over cell phones--given the data rate improvement in the latest generation of GPRS 2.5G phones--and local wireless networks (802.11 and Bluetooth). Cameras can be used anywhere--for example, traffic and airport monitoring--with wireless links to a centralized server for real-time control, comparative analysis, and archival storage. The cost and complexity of widespread surveillance and search has just plummeted.

Cheap biometric readers and distributed sensors are also innervating modern society and providing the substrate for emergent control systems over time. For example, emWare* ships a $1 Internet micro-server that requires less than 1K of memory, so customers are embedding these servers in everything from sprinklers to digital door locks. Billions of embedded microcontrollers are installed each year, and now they are communicating.

Given that many of the threats are within our corporations and among us, the solution may ultimately resemble the mammalian immune system. Diversity, adaptive systems, and massively distributed solutions are key.

*DFJ has an equity position in emWare.