“Winning in the race for e-business”

1. “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

2. Issues to be covered • 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.

3. 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.

4. 1,000,000,000,000 100,000,000,000 10,000,000,000 1,000,000,000 100,000,000 10,000,000 1,000,000 100,000 10,000 1,000 100 10 1 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 The cost-performance of electronics doubles every 18-24 months (Moore’s Law) 33 Doublings Source: Analysys

5. Pentium 4 Pentium III Pentium II 8008 Pentium 80486DX 80286 8080 4004 8086 80386DX Moore’s Law in Action:Intel Microprocessors 2T/18 Source: Intel & Silicon Image

6. Yemi Lawal: pp346003 op fibre & 45 000 40 000 35 000 30 000 Mbit/s 25 000 20 000 15 000 10 000 5000 0 1975 1980 1985 1990 1995 2000 2005 Opto-electronics follow the same path (Moore’s Law operates in telecoms, too) 32 Doublings Source: Analysys

7. Exponential growth in US WAN fibre bandwidth Tbps Source: Cisco & Silicon Image

8. Gigabit Ethernet installed base growth Millions Source: IDC & Silicon Image

9. 1,000,000,000,000 100,000,000,000 10,000,000,000 1,000,000,000 100,000,000 10,000,000 1,000,000 100,000 10,000 1,000 100 10 1 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 The cost-performance of magnetic storage doubles roughly every 18months… 26 Doublings Source: Silicon Image

10. Disk storage density is growing exponentially too… Source: IDC & Silicon Image

11. Magnetic disk costs (3.5” platters) Source: IDC & Silicon Image

12. Cooper’s law for wireless 42 Doublings 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 Source: ArrayComm

13. 23 000 Miles of wire in the USA 12 000 2000 40 1850 1852 1846 1848 Year But we have seen this before in the context of the telegraph… Source: Tom Standage, The Economist, “The Victorian Internet”

14. Structural demand for communications and IT Cost to users Short term demand Cost of basic technologies The structure of the economy is changing Source: Analysys

15. Microsoft Corporation, 1978 The first half of the chessboard has already delivered some surprises

16. All these devices are now mobile enabled... ….welcome to the world of m-business

17. 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?

18. Issues to be covered • 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.

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

20. 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, • 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. Source: UK Government PIU Report: “e-commerce@its.best.uk” and J. Norton

21. Dividing up e-Business & m-Business Process electronic business: the exchange of information about goods or services across electronic networks*, at any stage in the supply chainº, whether paid or unpaid, 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. Source: UK Government PIU Report Project Team notes

22. Impact on: Employment; Economic growth Costs and prices; Real income Business-to-business Business-to-consumer End-user businesses (Private and public sectors) • 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 • Delivery • Marketing, information management, security • Payment processing End-user business enablers Technology enablers Systems operations Networking/ hardware Systems integration Software • Hosting • Order payments/ processing • Customer data operations • Encryption software • Order payments/ processing software • PCs • Modems Roles within ‘E’ & ‘M’- Business Source: UK Government PIU Report Project Team

23. ‘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.

24. With acknowledgement to the Office of the e-Envoy

25. Issues to be covered • 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.

26. Does this remind you of anything? Great Western Railway Source: Bains, Crafts & Leunig - Sunday Times

27. It was ever thus…the e-Biz trough of disillusion Source: Gartner Group

28. The e-Business capability ‘hype’ cycle Source: Gartner Group

29. Roger Beale sums it up beautifully… With acknowledgement to Roger Beale at the FT - 13/3/01

30. Issues to be covered • 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.

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

32. UK: Share of total voice call volumes % share of UK voice call minutes Note: Excludes international, data, and non-geographic voice traffic • 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. Source: UK regulator Ofcom Market update (Jan 2005) data to end Q3 2004 http://www.ofcom.org.uk/research/industry_market_research/m_i_index/cmjan2005update/

33. UK Internet access statistics UK Internet connections (Millions) • Dial-up • Broadband Source: UK regulator Ofcom Market update (Jan 2005) data to end Q3 2004 http://www.ofcom.org.uk/research/industry_market_research/m_i_index/cmjan2005update/

34. Internet access by top 12 countries USA 19.9% RoW 33.4% China 10.7% Russia Japan Canada 2.3% 8.4% 2.2% Brazil 2.4% India France Italy South Korea 4.0% Germany 2.7% 2.7% 3.4% 4.5% UK 3.5% Global total 935 million as at 12/04 More than 300M new users in last two years… Source: Computer Industry Almanac 2004

35. Broadband access Narrowband access South Korea, Japan and Sweden lead in Broadband access percentage Source: Business in the Information Age Benchmarking Study Nov 2004

36. Communications spend as a proportion of household income has been steadily increasing across the OECD countries… Source: OECD SNA Database *Communications includes Telecommunications equipment and services and postal services Hungary, Norway, Slovak Republic, Switzerland and Turkey are not included

37. Dramatic traffic growth:Hong Kong example Source: ITU adapted from HK OFTA and PCCW I-Cable reports

38. Issues to be covered • 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.

39. 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…

40. Oh dear…! But always remember that new technology can sometimes have unexpected impacts….

41. Questions? Slides downloadable from: www.profjimnorton.com/shef05mba1.ppt