The Future of Business It won't surprise you to learn that I believe that much of the future of business lies on the Internet and its successor systems. Speculation about the future is a wonderful indulgence. No one really does it well. So I am going to cheat. What follows is a combination of predicting the immanent arrival of what is already proven in the technology labs, and predicting what projections of current trends suggest. I can't resist throwing a little unsupportable conjecture as well. EVERYONE ON EARTH WILL BE ON THE NET WITHIN 30 YEARS. I know this sounds impossible. So let's look at another phenomenon and see if the analogy makes this prediction easier to accept. Transistor radios are now in the hands of peasants working stoop labor in the rice fields of Thailand and China; and nomads travelling in the Sahara. These are among the worlds poorest people, but they are hooked to the broadcast system. This came about because of the invention of the transistor, less than 50 years ago. Radios dropped in price from the equivalent of the savings of half a life time for a peasant in 1945, to something affordable after a few weeks of scrimping. These people purchase radios and the endless stream of batteries they consume because they have both practical and recreational value. The weather reports matter. The music delights. Two way communication services are even more valuable. As I have repeated throughout this book, 2 way communication is what the net is really all about. What follows is an explanation of the forces that will cause the price of net access to drop to within the budget of the worlds poorest residents, and then a discussion of the impacts of this on business. THE TECHNICAL PROGRESS RATE, CONVERGENCE, AND DISINTERMEDIATION Let's start with an explanation of the underlying forces driving the internet's growth. 1 - TECHNICAL PROGRESS: The rate of technical progress is increasing. This rate governs the cost of technology; the faster the pace of progress, the faster costs drop. Right now most communication and computer technology declines in price at about 30 % a year. Every three years most products cost 1 to 10 percent of their prior price. This means each new dollar invested in internet hardware buys either more or better services. Most wonderful of all, as the price of high tech equipment declines; the ease of use increases. This lets more and more firms "do it yourself". 2 - CONVERGENCE: The rate of convergence is increasing. This rate governs the freedom to choose among competing technical systems. Right now you can access the Internet using the various telephone systems (cellular, radio, and wire based), the cable TV system, and the satellite communication services. This convergence is made possible by the technical progress in combining functions on low cost computer chip sets or systems. This creates competition, which lowers costs and improves the range and quality of services. 3 - DISINTERMEDIATION: The rate of disintermediation, ELIMINATING THE "MIDDLE MAN",is exploding. This rate governs the ability of firms to choose between providing a service themselves or using a third party service provider. When you can get on the net yourself and provide your own services you don't need Dialog or Sprint to do it for you. This can result in savings that you can share with customers in the form of lower prices. So more people can afford your services etc.; while existing customers can get more for the same amount of money. It also means your firm's creativity is unleashed. Compuserve and Dialog can only give you one way to present your products or information; on the net only your skill and imagination sets limits. THE BUSINESS IMPACTS OF CHEAP NET ACCESS The result of these three forces is that each day, more new networkers are attracted by the low cost of access and the expanding range of services. Their demands helps perpetuate the cycle. As a business person, you already new that. Here are some more specific impacts: 1 - COMMUNICATIONS THE END OF "LONG DISTANCE" CHARGES The world will be a single charge zone. Since the technology already exists for substituting an internet connection for a long distance phone call; it won't be long before the commercial callers, who are the mainstay of long distance telephone usage, primarily use lower cost net facilities for the calls. That will force a lower charge for long distance and finally an elimination of that tariff structure. THE END OF SPECIALIZED NETWORKS The arrival of excellent encryption tools makes it very hard to justify private data paths. Even the bankers will stop paying very high fees for a controlled access telecom system and settle for control over the ability to view the data. Services that demand high bandwidth will need specialized data paths for only a decade or so more. After that technical advances will allow for any site to receive any transmission - no matter how complex the transmitted data. 2 - THE STRUCTURE AND OPERATION OF BUSINESS The virtual firm will be the norm. Video telepresence will overcome the current problems with telecommuting. Fewer and fewer firms will have any need to create major clusters of offices in expensive central city sites. Only research facilities, storage services and retail outlets for daily necessities will be common. You can already order groceries and home delivered pizza on the net. With telepresence facilities, you will be able to choose the specific bunch of carrots you want. Need I say more. 3 - INFORMATION COST AND AVAILABILITY The price is dropping to the point where most basic information will be free. Custom research and intelligent reporting and analysis will cost money. The availability of information is increasing so rapidly that soon almost anything known will be net accessible. Secrets, based on technical knowledge, are going to get very hard to keep. 4 - INTERNATIONAL TRADE The existence of specialized overnight delivery systems which reach around the globe, combined with world wide networking will make most business a net based affair. Who really wants to travel to another business site to place an order or look a product when you can do it conveniently and virtually from your own office. THE PROBLEMS CONFRONTING NETWORKED BUSINESS 1 - PERMANENT ELECTRONIC INTRUSION The most important problem facing Internet based business activities is the high probability of electronic intrusion. There is a simple solution of course, and that is to use firewalls to protect all your sites and encryption in all critical transmissions.
Unfortunately, the most serious source of intrusion is likely to be your own government. In the U.S., the American Bankers Association and many other groups are opposing the governments recommended "encryption" standards because the very features that allow "police surveillance" also let the first 3 groups look at communications too. There is also the very real problem of the corruption of Government Agents. The U.S. congress has already had to discipline a Director of the CIA - for making use of commercial information gathered by the agency to further his own investment activities. And the Ames case should be fresh in everyone's memory. Its seems that very small sums are needed to corrupt even senior officials if they are unhappy. Businesses must use encryption and, at least for the present, must avoid any system that is GOVERNMENT APPROVED. You should also encourage every trade association you are a member of to take a stand on this issue. As an individual you might also join CPSR. I have place an item for it in the resource section. This organization provides the best coverage of issues related to business and personal privacy of any organization on the Internet. It has many local chapters. Virtually its entire membership is business people or computer related employees. 2 - FAILURE TO PASS ON TELECOM COST REDUCTIONS The lack of competition in phone services has meant that despite the fact technology costs for phone companies have been declining at the same rate as computer costs in general; those costs have not been passed on to consumers. The proof of this failure is easy to demonstrate. Basic phone and cable service cost about the same amount. Average home phones are in use about 5 minutes a day ( if you don't have a teenager ). Those phone carry about 28,800 bits per second. Your cable service is ON 24 hours a day, you may watch it up to 6 hours a day, and it delivers 10,000,000 bits per second. In other words, with your cable service, the same amount of money is buying hundreds of thousands of times more data, delivered for vastly longer amounts of time. Strangely enough, cable companies are making lots of money. The phone companies can be hurting either. Hopefully the newer and more competitive regulatory environment will change that. Again urge your trade associations to get involved in this issue. 3 - FAILURE TO PROVIDE UNIVERSAL ACCESS Many governments around the world have no current plans to provide or guarantee universal access. That must be corrected, without universal access every business suffers. First, the cost of providing government services is higher than necessary if every citizen and resident is not being serviced over the net. Second the efficiency of service delivery is lowered. I pointed out earlier that most governments are planning to force the business community to use the nets to deliver their taxes. The business community should return the favor and see that government uses the internet to provide more efficient service to all. Second, the most creative section of our economy is small inventors and small business. Far more innovation, especially commercially valuable applied technical innovation, comes out of garage based companies than out of major research labs. The entire microcomputer business began when employees who couldn't get backing from the major electronic companies where they worked, left to start their own tiny companies. Apple is a perfect example. These independent researchers and small startups need good access to information and commercial resources if we are to maximize innovation. That means all of us have a commercial interest in universal service. Third, the lack of a net based marketplace will diminish the international competitiveness of local companies. Any nations who's companies lack a knowledge of net based commerce, will not be competitive in the future. Get personally involved in this issue. Raise it with your local politicians. 4 - JOB LOSS VERSUS JOB CREATION Just as the impact of computers on need for middle management took almost a decade and then a recession to finally hit home, the employment impacts of the internet won't be obvious for several years. I believe that they will be two fold. Many jobs will be lost because of increased efficiency of operations. Many jobs will be created by innovation made possible by the net. I wish I could predict which process will have the greatest impact. But I can't. I hope the creativity of the business community finally leads to more job creation than loss. 5 - THE NEED FOR GLOBAL COMMERCIAL NETWORK LAWS Global Enterprise requires consistent global law in the area of telecommunications, contracts, and other business matters. Perhaps GATT and the U.N. will provide adequate forums for the development of these necessary legislative changes. If not the conformation will have to sought at a national level. Among the problems not yet covered are almost all the civil law issues effecting commerce. Spain, for example, forbids encryption. How any business can be transacted in a secure fashion with Spanish businesses remains to be seen. Hopefully, Spanish law will give way before the damage to the Spanish economy is excessive. by Sam
Sternberg
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