IT, Status and Future

What is the status of IT industry or what are the criteria to judge the status of IT industry? Whether it is a mature industry or it is an industry ready for rapid growth? The answers have significant consequences not only to the IT industry but also to the whole business world. After a critical assessment of the status of IT industry, we believe that the IT industry is currently in a transition period after the bubble of 2001, and we will be likely to see a business boom in 2007.

Nicholas G. Carr published a controversial article “IT doesn’t matter” in Harvard Business Review in May 2003. Carr writes "while no one can say precisely when the build out of infrastructural technology has concluded, there are many signs that the IT build out is much closer to its end than its beginning." Among the indications are the affordability of IT, vendors positioning themselves as utility suppliers, an overabundance of fiber-optic capacity, and IT capabilities outstripping most business needs. Larry Ellison, the chairman of Oracle Corp., has been one of the most vocal proponents of the view that the technology industry is graying (Steve Lohr, New York Time, May 5, 2003).

However, Carr’s article has attracted fierce criticisms from many people in the IT industry. “Harvard Business Review has 243,000 extremely influential readers. So if it publishes an article saying that information technology doesn’t matter, then an awful lot of important business leaders are going to believe it. And if they do, they’ll run their companies-and our economy-into a ditch.” (Robert M. Metcalfe, MIT Technology Review, June 2004). At Microsoft, Steve Ballmer responded “hogwash”, while Bill Gates said: “We disagree with all of this.” GE CEO Jeffrey Immelt said the idea is “stupid”. HP CEO Carly Fiorina said Carr is “dead wrong”.

On the other hand, on the basis of the progress of unifying standards in the computer industry and electronics industry, some people think the big bang has arrived, or the convergence of the $1.1 trillion computer and software business, the $2.2 trillion communication industry and the $225 billion consumer electronics industry (Stephen Baker and Heather Green, Business Week, June 21, 2004).

In view of the conflicting opinions from business leaders and experts, it seems necessary to have a critical assessment of the status and future of the IT industry. Such critical information is valuable to business and technology managers, investors, policy makers, and anyone with a stake in future of IT industry.

We start with the basic assessment of whether IT is an infrastructure technology. As an infrastructure technology, its value will be maximized when it is widely used. As a process technology, it is best to keep it secret. Obviously IT has an infrastructure component and a process component, and sometimes it is difficult to make a clear distinction. A certain technology may be a process technology at its beginning and then becomes an infrastructure technology. Nevertheless, it is reasonable to assume most information technology is an infrastructure technology. As a result, IT will share the basic characteristics of an infrastructure technology such as railroad, telephone and electricity. This does not mean that IT is no longer important, which is a misimpression caused by the title “IT doesn’t matter” of Carr’s article. It simply means IT is no longer a competitive edge since everyone has the same technology and adopts the same best practice. Of course, it is certainly a serious disadvantage if you do not have the technology.

The difference lies at the current status of IT industry. In our opinion, IT industry is in a transition period. We are still in the early days of the digital age and the rapid growth lies ahead. IT will be the source of an upcoming economic boom.

Some people come to the conclusion of a mature IT industry based on indications such as the affordability and over-capability of IT and an overabundance of fiber-optic capacity. However, these superficial observations can be misleading. A better way to judge the status of an infrastructural technology is whether a stable platform has emerged from the industry over a period of competing products and technical debates. For the railroad, that was the establishment of the standard gauge. For the electricity, that was the adoption of the alternating current with a standard voltage and frequency. Some people think the internet is the standard gauge of the IT infrastructure. In reality, the internet is just part of the IT infrastructure. A stable platform should cover all the physical communication networks. Moreover, the internet itself is not well developed yet as evidenced by the many problems facing the internet such as identity theft and email spam. All these problems are caused by the system shortcoming of the internet and are best addressed by a remedy at the system level. In fact, people with a deep understanding of the technology have a better clue about the status of the industry, as Jim Gray, who received the 1999 A.M. Turing Award, said “My guess is that this computer thing has just gotten started”(Steve Lohr, New York Time, May 5, 2003).

If a stable platform has not emerged, what will the platform look like and when will it emerge? The answer is a people-oriented universal communication system and it will be likely to be available around 2007. Of course, the adoption of a standard infrastructure can happen sooner if companies in IT industries work together to speed up the process.

The “universal” capability simply means the system works universally with all physical networks and devices. The “people-oriented” capability means that the physical networks and devices have the capability to identify people. The people-oriented universal communication system will unify all the available physical networks and devices and provide a common platform for efficient e-business solutions. This will lead to the convergence of the telecommunication industry, computer and software industry, and consumer electronics industry.

At present, many companies have already realized the need for the universal capability. A lot of progresses have been made to unify standards in the computer and electronics industry thanks to the efforts of many organizations such as DLNA (Digital Living Network Alliance), UPnP (Universal Plug and Play Forum) and Internet Home Alliance. Some people think this is the big bang for the convergence of the computer and software business, the communication industry and the consumer electronics industry. However, the true convergence will not happen until a people-oriented universal communication system is established as a common platform for various e-business solutions.

Very few companies have realized the importance of a people-oriented component across all physical networks and devices. We are so accustomed to the location-oriented communication system that we failed to see the location-oriented system as the major obstacle to further growth of the industry. One positive development is from a Japanese company NTT DoCoMo. Its approach to use the cellular phone as a universal controller to computers is a right step towards ubiquitous computing (Charles C. Mann, MIT Technology Review, July 2004).

The people-oriented feature should work universally for all physical networks and devices. All the messages, documents, audio files and video files are also people-oriented with the ownership information and a mechanism to universally verify the ownership identity. For example, the sender and receiver information of an email is not enough, and a mechanism should be universally available to verify the identity of the sender and receiver. A music file should also have an ownership identity and the mechanism to verify the identity. Then we can identify positively the sender of an email, and deliver copyrighted materials legally on the internet. We will see a reinvented internet with a people-oriented component. Identity theft, email spam, illegal music file sharing, electronic voting fraud, all these problems can be solved with a people-oriented universal communication system.

We can make a few predictions when a stable platform of people-oriented universal communication emerges in 2007.

1. Boom of IT industry. The stable platform of people-oriented universal communication will create a huge market from the traditional telecommunication industry to such industries as motion pictures, television, publishing, music, personal computer, physical delivery, electronic devices, appliances, and retail sale. This market-driven demand will fuel the healthy growth of the broadband and the wireless sectors. What seems overcapacity at present will soon be consumed by the emerging new products and services. This will provide enormous growth in IT industry. The majority of growth will come from new products and services made possible by the platform of people-oriented universal communication system. The remaining growth will come from the increase of sales due to the lower price of software and hardware enabled by a standard infrastructure.

2. Business reshuffle. Similar to the railroad and electricity industry, the period of rapid growth is also a period of consolidation. Especially when we have the convergence of three huge industrial sectors of computer, communication and consumer electronics, we will see considerable competition and reshuffle. New products, reliability, and cost of products and services are the major factors for the success of a company.

3. Email will replace regular mail as the dominant form of personal and business correspondence. Now an email can be sealed for security and privacy so that only the intended receiver can read it and the identity of the sender can be positively resolved. As more and more letters and payments are sent electronically, the post service will lose much of its business.

4. CD and DVD will no longer be the media for music and movie distribution. As the rights of digital materials are properly addressed, music will be sold online on a per-song basis and movies will be downloaded. On a people-oriented system, people can play the music and video on any physical devices as long as the user is the legal owner of the digital files.

5. Newspapers will be mostly online. This eliminates the cost of printing and delivery. As a result, the subscription fee will be decreased and readership will be increased. Especially the international readership of major newspapers will be significantly increased. People are also able to buy a single copy of a newspaper online.

6. Business software development will be different. Software components and tools will be developed by specialized software companies. In contrast to the labor-intensive development process of business software today, most business software will be assembled from components from vendors using software tools. As a result, the IT consulting business and IT outsourcing will shrink. The cost and time for business software development will be significantly reduced. As Carr points out, the reliability of the IT system becomes very critical. Therefore, the importance of well-trained support staff cannot be overstated.

About Acroscape: Acroscape is an independent invention business established by Dr. Hengning Wu in 2001. Acroscape focuses on innovative ideas with technological, economical and social significance. More information is available at http://www.acroscape.com.

October 14, 2004