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TECH TALK: Envisioning the Future: IT and the Internet (Part 2)

April 18th, 2001 · No Comments

Pam Woodall of the Economist puts the changes being brought about by IT and the Internet in context:

In addition to plunging prices, computers and the Internet have four other noteworthy features:

  • IT is pervasive: it can boost efficiency in almost everything a firm does, from design to marketing to accounting, and in every sector of the economy.
  • By increasing access to information, IT helps to make markets work more efficientlyIt moves the economy closer to the textbook model of perfect competition, which assumes abundant information, many buyers and sellers, zero transaction costs and no barriers to entry.
  • IT is truly global. By reducing the cost of communications, IT has helped to globalise production and capital markets. In turn, globalisation spurs competition and hence innovation, and speeds up the diffusion of new technology through trade and investment.
  • IT speeds up innovation itself, by making it easier and cheaper to process large amounts of data and reducing the time it takes to design new products.

A number of parallel innovations are riding on the IT-Internet bandwagon. Cellphones are making us reachable everywhere. Technologies like Bluetooth and 802.11b will ensure that the multitude of devices we will have around us can communicate without wires, thus solving the “last few feet” problem. Innovations will increase battery life, so these devices can work longer in between being charged. Even in biotechnology, the time it took to decode the human genome was reduced dramatically due to the computing power available, and the ability for researchers to share their knowledge rapidly due to the Internet.

One thing which we have learnt in the past year is that what does not change are the laws of economics and markets. Profits and growth are what companies need to survive and thrive. There will be very few survivors from the thousands of Internet companies that have been created worldwide. Eyeballs are important, but as even Yahoo has realised, paying customers are the ones on which all great companies are built upon.

A recent study by Merrill Lynch of the revenue growth of publicly traded technology, software and services companies between 1981-2000 provides an amazing statistic: only 1 company (Cisco) provided over 30% revenue growth for 10 years in a row. (Microsoft was the only software/services company whose revenue grew over 20% sequentially for 10 years). The conclusion: Sequential revenue growth over a period of years is the rare exception – not the rule…Software companies grow more rapidly and for a shorter period of time than the average technology company. However, it is equally difficult for software and other technology companies to sustain 20%, 30% and 40% sequential growth.

What of the future? Write Stephen Cohen, Brad DeLong, and John Zysman (December 1999):

There is a chance – a very good chance – that 100 years from now people will look back at our current wave of technological innovation and conclude that they are “tools.” The tools of the industrial revolution amplified muscle power: you didn’t have to rely on a human or a horse anymore. The tools being forged today are powerful: you don’t have to rely on human memory, or on human eyes scanning pages and pages of poorly-sorted information, to remember or organize things. The technological tools that are being forged today will be used to calculate, sort, search, organize-amplify what we might as well call brain power in an analogy to the industrial revolution’s amplification of muscle power – in every economic activity in which organization, information processing, or communication is important. And organization, information processing, or communication is important in every single economic activity.

Clearly, this revolution is still in its early days. One of the biggest challenges in the years ahead is to bridge the digital divide: 95% of the world is still not connected to the Internet. What is needed is to think about putting together a low-cost computing and communications infrastructure which can envelope the world to create a ubiquitous, pervasive network.

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