During my wonderful Christmas break I had plenty of time to think about what some of the interesting stories and  trends are likely to be across the technology world in 2012. In fact I think I may have had too much time as the list grew rather large but after some ruthless editing I managed to whittle  them down to eight as follows:

1. Technology IPO’s

With Pandora, LinkedIn, Groupon and Zynga all having their IPO’s in 2011 we now have a good number of runners and riders up and running in terms of the new generation of internet companies hitting the public markets. Generally these  companies have impressive revenue numbers and growth but there are concerns about their ability to make money and be  solid performers over the long term. In all cases their share price is way off their highs of last year (somewhere between a  half and three quarters) that were propelled by their IPO ‘pop’ which is a tried and tested technique of the investment  bankers. This year we can expect the grand entry of Facebook that will act as the leader and bellwether for this group of  companies. I think both the Facebook IPO, and the rest of the group’s performance, will be big stories during 2012. But I  remain confident that this is not another internet bubble and, although share prices will be volatile (as they will be for any momentum stock in this economy), I don’t see another big crash and think most of these companies will go on to be strong and lasting brands in the years ahead.

2. A computer in your pocket

During 2012 the number of smartphones will go through the 1bn mark giving them almost a 20% share amongst all mobile phone users and a 60% share in the US. This makes the smartphone the fastest growing technology device ever and it will soon be the primary way of accessing the internet. I think 2012 will be the year when both mobile advertising and mobile commerce starts to hit the mainstream. By the end of the year I think it will be pretty normal to both respond to advertising and also to buy things using your smartphone. This will clearly bring great opportunities for brands and merchants to market themselves and sell their products to a huge market and through a medium that the consumer will always have with them.

3. Facebook growth

I expect the recent talk to continue about Facebook’s saturation with both users and activity beginning to plateau out. People only have so much time and the world only has so many internet users, so the saturation of social networks was bound to happen and will happen in 2012.  But, despite it being their IPO year, I don’t think Facebook will care very much because their focus has been on the platform, as opposed to the application, for sometime now. Facebook wants to be the web’s ‘operating system’ making it a more connected and therefore a valuable resource and their application is just one part of this. In this way I think they will have a successful IPO (probably in April) that will value the business at more than $100bn and their on-going growth will be more dependent on the platform than the application.

4. The business graph

During 2012 we will hear more on the concept of the ‘business graph’ as opposed to the ‘social graph.’ Consumers are now at the cutting edge of technology and set the agenda in terms of innovation and adoption. In 2012 I expect businesses to follow in the footsteps of the consumer and step up their use of social technologies in building and growing business networks mainly focused on improved process automation and helping them to work together more effectively.

5. Keeping your ‘stuff’ in the cloud

Content management and collaboration is one of the cloud’s largest and most dynamic markets. The largest independent players are Dropbox and Box.Net who have both raised tons of money; and hot on their heels are offerings from three of the largest tech companies in the world namely Apple, Google and Amazon. I think in 2012 these services will start to ‘cross the chasm’ into the mainstream as people start to get more comfortable with storing their ‘stuff’ in the cloud. I also think these companies will step up their focus on more secure, enterprise-strength versions of their products as they try to tap into the business market. All this will help people understand the benefits of cloud computing and especially the untethered, pay as you go freedom that it brings.

6. Buying into software’s future

I believe that software-as-a-service (so called ‘SaaS’) is the future of software. I also believe that there is no evidence that traditional software vendors have been able to organically build a successful SaaS business within their overall organization. I cannot think of a single example where this has happened. The main reasons for this are that the two businesses are completely different animals and also that the new division will always be in conflict and looking to cannibalize the core business. The big software companies are starting to accept this and coming to the realization that they will have to buy their way into the future. This happened with my company, MessageLabs, being acquired by Symantec and there have been two recent examples in Oracle buying RightNow and SAP snapping up SuccessFactors. I expect this to continue in 2012 and see the most likely buyers being Microsoft, HP, Oracle, SAP and IBM and the most likely targets Netsuite, Taleo, Liveperson, Jive, and even Salesforce (although this is getting rather big for most people.) I don’t expect these acquisitions to be successful and will more likely open the door for the rest of the independent SaaS providers in their space but it won’t stop them trying!

7. Making sense of all this public data

The combination of better publishing tools and social media have led to an extraordinary amount of content being created and shared – but for the most part it is only being used on a fairly superficial and isolated level. I expect data companies to make it possible to analyze and cross-reference this data in a much deeper and more far reaching way. This will enable companies and individuals to gain comprehensive and real-time intelligence on what we like/dislike and why, how we respond to things and just about anything else that we care about.

8. Is now the right time to buy Twitter?

Just so I’m including something out of ‘left field’ I think that 2012 might be the right time to buy Twitter. I believe that the importance, the value and the potential of Twitter is generally under-estimated. I also think the platform will become one of the primary ways of sharing information and establishing identity on the web – something that is especially true with the rise of the smartphone driving the need for more concise content. In this way I think the business has a decent chance of turning itself into one of the most valuable media companies in the world. This might all sound like pie in the sky for a company generating about $150m in revenues but it’s something that I’ve just got a bit of a hunch about. I know that they have to fix their interface, their revenue model, their brand perception and just about everything else – but you could argue this just serves to depress the value and make them an even more attractive target. I would bet that there are many companies thinking the same way and that this might be a good time to make a move – before the rest of the world realizes the potential they have and before their revenues, and therefore their valuation, ramps up. The buyers could be old world or new world media companies but I have a hunch that it could happen this year.

My belief is that investors and entrepreneurs should spend more of their time looking up than down.  I certainly feel, as an investor and how I evaluate and work with companies, that up is much more important than down.

By ‘looking up’ I’m talking about thinking about the true potential of a business and how you’re going to get there. I love the idea of thinking about where you would like to be in five years time and working back from there. What would you need to get there in terms of people, funding and other resources? What milestones will you need to hit along the way? How will your strategy evolve?

I think US companies are much better at doing this and then really ‘living it’ in terms of believing in the vision and that you will do what it takes to get there. This includes taking on the right people and partners and generally having the right attitude to make it happen.

For me ‘looking down’ is more about protecting what you have and limiting the downside for a business. This involves you looking at things in the more immediate future – things like budgets, cash reserves, and major risks. It’s also about worrying about the effects of a new strategy on your existing business or of having your shareholding diluted to bring in new funds.  These things of course have their place and there is nothing more important than making sure you don’t run out of money. But if you become preoccupied with them you often do it at the expense of the true potential of your business.

There’s a famous quote by Paulo Coelho as follows:

“There is only one thing that makes a dream impossible to achieve: the fear of failure.”

A fear of failure will hold you back in whatever you are doing but especially in building a business. This fear exists much more in Europe and it very often prevents companies and people really taking risks or ‘swinging for the fences’ as the Americans would say; but this is the way you really build big companies. Having lived in the US for many years now I have seen first hand how the attitude to risk and failure is so different. How every failure is an experience that will make you better the next time. How there is genuinely no negative bias towards people who have failed and if anything there is admiration.

As an investor I’m prepared to take risks in search of big outcomes. If you think about it protecting your downside you will only ever protect the money you have invested. But if you focus on the upside, on the potential and really drive towards a big vision a few years down the road that’s how big businesses are built. And for me that’s how big returns are achieved.

If a business doesn’t work out then I lose my investment. But if a company becomes a true global success story my money could be multiplied by 10 or even 20x. I certainly know where I’ll be spending my time.