Tech: what comes next - CEO Agenda 2004 - information technology outlook

Chief Executive, The, Dec, 2003 by Irving Wladawksy-Berger

Some CEOs may think the technology opportunities of the late 1990s were just hype, and that it's time to go back to business as usual. I respectfully disagree. In coming years, information technology, applied thoughtfully, will unleash a major new round of innovation. This will have profound implications for relationships among businesses and may even alter the structure of the economy itself.

Innovation isn't a smooth process. Information technology always progresses by stages, with incremental advances accelerating to a "tipping point" and ushering in the next phase. In the 1980s, microprocessors combined with new personal productivity applications to spark the personal computer revolution. In the 1990s, the PC combined with Internet standards and the Web to foment the Internet revolution and e-business.

We can now begin to see the shape of the next era. According to industry watchers, by 2006 the number of devices attached to the Internet--everything from PCs, smart phones and set-top boxes to radio frequency ID tags, home appliances and automobiles, is expected to approach 10 billion. The number of users will approximate 1 billion, the number of online buyers a half billion and the total amount of commerce $5.5 trillion.

Whether one considers microprocessors, memory, storage, bandwidth or displays, the rate of advance is nothing short of spectacular. Not only is Moore's Law alive and well, in some cases it has turned super-exponential, meaning that every year performance increases faster than the year before. The price/performance ratio of microprocessors, for example, has made them so affordable that they can be integrated in huge numbers into everything from oil well drilling rigs to home appliances.

At the other end of the spectrum, technology's advance is evident in incredibly powerful supercomputers like the one we call Blue Gene, which is being built at IBM Research. It will comprise more than 64,000 microprocessors and will achieve around 250 trillion calculations per second. As of this October, we had linked 1,024 microprocessors capable of a peak of 2 trillion calculations per second and packaged it in a rack the size of a small file cabinet.

The net result of these advances is an infrastructure that is growing in capacity, one that is becoming far more powerful, far more scalable, far more diverse and far richer than anything we have had. We can gather information from all the intelligent devices that are becoming increasingly powerful, less expensive and more pervasive; we can access that information in real time with our increasingly open networks; and we can analyze it and take immediate action with our increasingly powerful computers. We can reduce the complexity of the IT infrastructure by making it increasingly autonomic or self-managing.

All these advances are bringing IT to a new tipping point and leading to an era in which a resilient infrastructure will integrate information, people and business processes to a degree that transcends the simple access to content and transactions enabled by the Internet in the previous era. Increasingly, IT is progressing toward unprecedented levels of real-time responsiveness to customers, colleagues and trading partners.

If anything, the market forces that inspired the e-business phenomenon have intensified. Companies are looking for new levels of efficiency and competitiveness. They are looking to find better ways to attract and retain customers, develop better products and get them to market faster and to form and extend more productive value chains. That's because, in what we at IBM call the "On Demand" era, customers expect to get what they want, when they want it, on their own terms.

That's why we need to take e-business integration to an entirely new level. This confluence of business need with advanced technological capabilities is driving IT deeper and deeper into business, making the two virtually inseparable.

Here's just one small example of what I'm talking about. People used to go to branch banks to make deposits and withdrawals, which the bank reconciled at the end of the day. Today, banks offer customers a variety of online services, from checking accounts to bill payment, all in real time. Transactions that once happened at day's end now happen simultaneously, because technology enables banks to integrate processes like deposits and withdrawals with accounting.

Even that progress is being surpassed as emerging technologies like grid computing, Web services and intelligent software foster the integration of resources and applications, people and processes to an extent undreamed of even five years ago. Those same banks could apply vastly tighter security and risk management analysis to reduce the possibility of fraud. At the same time, a bank could run real-time analysis of the effect of those transactions on their customers' portfolios and provide them with alternative strategies on the spot.

Every business process will be affected by the changes I am describing. Think about the implications. A business or any other institution can be thought of as a collection of interconnected processes. Information technology has automated many of those processes through the years, e.g., payroll and credit card authorization. But this application of technology to business has been piecemeal and fragmented.