“winning in the race for e-business”

“Winning in the race for e-business”

Lecture One - “e-business myths and realities”

Presentation to Sheffield University Management School MBA Students

17 February 2005

Prof. Jim Norton

Senior Policy Adviser

UK Institute of Directors

Former Director UK

Cabinet Office PIU

e-Commerce team

www.profjimnorton.com

•Setting the scene - the impact of exponential growth.

•What do we mean by e-business?

•‘Bubbles’ should not surprise us…

•Telecoms. and e-business are still very much alive…

•Summing up - fertile soil.

Issues to be covered

The second half of the chessboard

Original idea: George Gilder at the Cato-Brookings Institution conference "Regulation in the Digital Age," held in Washington D.C. on April 17-18, 1997.

The cost-performance of electronics doubles every 18-24 months (Moore’s Law)

110

100

1,00010,000

100,0001,000,000

10,000,000100,000,000

1,000,000,00010,000,000,000

100,000,000,0001,000,000,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Source: Analysys

33 Doublings

Moore’s Law in Action:Intel Microprocessors

Source: Intel & Silicon Image

0

5

10

15

20

25

30

35

40

45

197119731975197719791981198319851987198919911993199519971999

M Transistors

4004

8008

8080 8086 80286 80386DX 80486DXPentium

Pentium II

Pentium III

Pentium 4

2T/18

Opto-electronics follow the same path (Moore’s Law operates in telecoms, too)

Source: Analysys

32 Doublings 1980 1985 1990 1995 2000 20050

5000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

1975

Mbit/s

Exponential growth in US WAN fibre bandwidth

0102030405060708090

100

1996 1997 1998 1999 2000 2001

Tb

ps

Source: Cisco & Silicon Image

Gigabit Ethernet installed base growth

0

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003E 2004E

GBE Ports (Installed)

Mil

lio

ns

Source: IDC & Silicon Image

The cost-performance of magnetic storage doubles roughly every 18months…

110

100

1,00010,000

100,0001,000,000

10,000,000100,000,000

1,000,000,00010,000,000,000

100,000,000,0001,000,000,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Source: Silicon Image

26 Doublings

Disk storage density is growing exponentially too…

0

50

100

150

200

250

1996 1997 1998 1999 2000 2001 20022003E2004E

Gb/sqin


Magnetic disk costs (3.5” platters)

0

20

40

60

80

100

120

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$/GB


Cooper’s law for wireless

1

100

10,000

1,000,000

100,000,000

10,000,000,000

1,000,000,000,000

100,000,000,000,000

1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005

Cooper’s Law, (after ArrayComm Chairman, Martin Cooper), states that the number of conversations (voice and data) conducted over a given area, in all of the useful radio spectrum, has doubled every two and a half years for the last 105 years, ever since Marconi discovered radio in 1895

42 Doublings

Source: ArrayComm

But we have seen this before in the context of the telegraph…

1850 1852

Year

1846 1848

Miles of wire in the USA 23 000

12 000

200040

Source: Tom Standage, The Economist, “The Victorian Internet”

The structure of the economy is changing

Structural demand for communications and

IT

Cost of basic technologies

Cost to users Short term demand

Source: Analysys

The first half of the chessboard has already delivered some surprises

Microsoft Corporation, 1978

All these devices are now mobile enabled...

….welcome to the world of m-business

We are drowning in data….

Where is the life we have lost in living?Where is the wisdom we have lost in knowledge?Where is the knowledge we have lost in information?

T S Eliot, Choruses from ‘The Rock’, 1934

And a codicil for the 21st century… Where is the information we have lost in data?

With acknowledgement to Roger Beale at the Daily Telegraph...

e-Business & m-Business: A working definition

e-Business is the exchange of information across electronic networks, at any stage in the supply chain, whether paid or unpaid. It can take place:

•within an organisation,

Source: UK Government PIU Report: “[email protected]” and J. Norton

•between businesses, •between businesses and consumers; or•between the public and private sectors.

m-Business is the same but using access devices which are not tethered to a fixed infrastructure.

Dividing up e-Business & m-BusinessProcess electronic business: the exchange of information about goods or services across electronic networks*, at any stage in the supply chainº, whether paid or unpaid,

Source: UK Government PIU Report Project Team notes

Transactional electronic business: the sale of goods or services over electronic networks*, at any stage in the supply chain°. The sale is transacted electronically, but ultimate delivery of the good or service may be conducted on or off-line.

(*Electronic networks include the Internet, telephone networks, electronic data interchange, and digital television.)

(°The ‘supply chain’ includes actions between businesses, between businesses and consumers, or between the public and private sectors.)

Again m-business supports both types of action.

Roles within ‘E’ & ‘M’- Business

Technology enablers

End-user business enablers

End-user businesses(Private and public sectors)

Business-to-business Business-to-consumer

Impact on: Employment; Economic growth Costs and prices; Real income

Networking/ hardware

Software Systems integration

Systems operations

• PCs• Modems

• Encryption software• Order payments/ processing software

• Hosting• Order payments/ processing• Customer data operations

• Delivery• Marketing, information management, security• Payment processing

• Information provision e.g. CNN• Transactors e.g. Amazon, Dell• Virtual communities e.g. Motley Fool• Portals e.g. Yahoo, Excite

• Access provision • Advertising• Market places• Intranets• Transactors

Source: UK Government PIU Report Project Team

‘E’ and ‘M’- Business represent fundamental change

Yes, there was hype. Yes, some high profile businesses failed, but now the dust is settling both business and society are being profoundly changed, and far more quickly than we might have imagined.

I believe that we are now seeing change of a nature comparable in the UK only to the widespread introduction of electrification at the end of the nineteenth century. Then there were stock market bubbles and high profile failures, but also fundamental change in both industry and society.

Perhaps the move to ‘m’ business is equivalent to the move from DC to AC electrical power distribution - facilitating flexibility and wide area use.

With acknowledgement to the Office of the e-Envoy

Does this remind you of anything?

50

75

100

125

150

175

200

225

1844 1845 1846 1847 1848 1849 1850 1851 1852

Great Western Railway

Source: Bains, Crafts & Leunig - Sunday Times

It was ever thus…the e-Biz trough of disillusion

Source: Gartner Group

The e-Business capability ‘hype’ cycle

Source: Gartner Group

Roger Beale sums it up beautifully…

With acknowledgement to Roger Beale at the FT - 13/3/01

UK: Revenue from telecommunications services

Source: UK regulator Ofcom Market update (Jan 2005) data to end Q3 2004http://www.ofcom.org.uk/research/industry_market_research/m_i_index/cmjan2005update/

• Retail telecomms. Servs. revenues were £9Bn in Q3/04;

• 1% rise quarter on quarter; 2% rise compared to Q3/03;

• Mobile revenues up 4% Q on Q; and

• Fixed and access revenues down 3% Q on Q.

UK: Share of total voice call volumes


• Calls originating or terminating on a mobile network reached 38%in Q3/04; and

• Overall mobile accounted for 31% of all Uk originated voice calls in Q3/04.

% share of UK voice call minutes

Note: Excludes international, data, and non-geographic voice traffic

UK Internet access statistics

• Dial-up

Broadband

UK Internet connections (Millions)


UK3.5%

South Korea3.4%

Italy2.7%

France2.7%

Brazil2.4%

Russia2.3%

Canada2.2%

RoW33.4%

China10.7%

Germany4.5%

USA19.9%

Japan8.4%

India4.0%

Global total 935 million as at 12/04

Source: Computer Industry Almanac 2004

More than 300M new users in last two years…

Internet access by top 12 countries

South Korea, Japan and Sweden lead in Broadband access percentage

Source: Business in the Information Age Benchmarking Study Nov 2004

Broadband access

Narrowband access

Communications spend as a proportion of household income has been steadily increasing across the OECD countries…

*Communications includes Telecommunications equipment and services and postal services

Hungary, Norway, Slovak Republic, Switzerland and Turkey are not included

Source: OECDSNA Database

Dramatic traffic growth:Hong Kong example

Source: ITU adapted from HK OFTA and PCCW I-Cable reports

Summing up: Fertile soil

e-Business has not gone away!

The excess of gloom on the ‘downside’ was just as wrong as the earlier excess of ‘hype’.

e-Business represents a complex ecology, don’t just focus on the end users.

UK has come from behind, particularly on consumer Internet access, but is now catching up.

Remember, the underlying technological capability continues to grow exponential in terms of price performance ratio…

But always remember that new technology can sometimes

have unexpected impacts….

Oh dear…!

Questions?

Slides downloadable from: www.profjimnorton.com/shef05mba1.ppt

“winning in the race for e-business”

Documents

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ebusiness lecture

working definitionebusiness

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