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New Technology In Business Humanity is in the midst of a global information revolution driven by the convergence and proliferation of information and communication technologies. The telecommunications sector is changing at warp speed, driven by technological innovation that results in new equipment and services, and also by new entrants and alliances between companies with experience in a wide range of information industries from telecommunications to broadcasting to computer hardware and software to publishing. Three major trends are driving these changes (Commission of European Communities): the rapid introduction of new technologies and services; the restructuring of the telecommunications sector; and globalization of economies and of communications. Together these developments are not only changing the world of telecommunications, but the ways people work, learn, and interact. The death of distance as a determinant of the cost of communications will probably be the single most important economic force shaping society in the first half of the next century. (The Economist) The death of distance could have profound implications for both individuals and organizations. The ability to work anytime, anywhere allows road warriors to work without offices on planes, in hotels, and at client sites, and enables information workers to telecommute from their homes rather than traveling to work.
This flexibility can be two-edged for individuals, who can work wherever they choose but may never escape the virtual workplace. (Alan, 1) Organizations may reduce their overhead costs and improve their productivity, but they must also learn how to manage their decentralized work force. One major technological trend is the extension of information superhighways in the form of broadband networks (Bhargava). Another one is the increasing ubiquity of communications using wireless technologies (that will, however, initially provide access to squirts rather than floods of information) (Bhargava). Personal communications networks using micro cellular technology will allow people in urban areas not only to talk on pocket-sized telephones, but to transmit and receive data using wireless modems. In rural and developing areas, these services may be available from low earth-orbiting (LEO) satellite systems. On an international level, the death of distance has profound implications for the globalization of industries and national economies.
Rural regions in Europe and North America may lure businesses with their pleasant environment and lower labor costs; however, they are no longer competing only with cities in their own countries. Companies may hire information workers in developing countries where labor is far cheaper, not only for data entry and word processing, but for writing computer programs (Hudson, 279). Conversely, developing countries now find themselves competing in global markets, where quality and suitability of products may be as important as price. For over a decade, empirical studies in the information technology (IT) value literature have examined the impact of technology investments on various measures of performance. However, the results of these studies, especially those examining the contribution of IT to productivity, have been mixed. One reason for these mixed empirical findings may be that these studies have not effectively accounted for the impact of technology investments that increase production efficiency and improve product quality on firm productivity.
In particular, it is commonly assumed that such investments should lead to gains in both profits and productivity (Gundepudi). However, using a closed-form analytical model, this underlying assumption can be challenged and it can be demonstrated that investments in certain efficiency-enhancing technologies may be expected to decrease the productivity of profit-maximizing firms. More specifically, it can be demonstrated that investments in technologies that reduce the firms fixed overhead costs do not affect the firms product quality and pricing decisions but do increase profits and improve productivity. In addition, investments in technologies that reduce the variable costs of designing, developing, and manufacturing a product encourage the firm to improve product quality and to charge a higher price (Gundepudi). Although this adjustment helps the firm to capture higher profits, it will also increase total production costs and will, under a range of conditions, decrease firm productivity.
Finally, the direction of firm productivity following such investments depends upon the relationship between the fixed costs of the firm and the size of the market. Telecommunications networks now link manufacturers with assembly plants, designers with factories, software engineers with hardware vendors, suppliers with retailers, retailers with customers. No longer is it necessary to have all the expertise in house. Software engineers in Silicon Valley complain that they are laid off while contractors transmit code from Russia and India (Stokes, 1727). Freelance designers can now send clothing patterns directly to an automated garment factory. Customers can order anything from airline tickets to winter clothing online and do their own banking and bill paying electronically.
These trends open opportunities for innovative entrepreneurs around the world. For consumers, they offer more choice and lower prices because there is no overhead cost for sales clerks and order takers. Yet these changes pose threats to traditional businesses as well as to employees. Increasingly, companies that want to compete on price will have to work smarter to reduce costs and respond to market changes, while others will have to rethink how to add value to attract customers. High levels of customer service and individualized attention are likely to become more important.
As Wells Fargo found (Parker), a bank that offers assistance from a human twenty-four hours a day in addition to online electronic banking can attract new customers. Computer vendors that offer free and easy-to-reach customer support may be able to charge a premium, or at least not lose customers to commodity discounters. More than half the computers in U. S.
offices are linked to local area networks (LANs). Increasingly, businesses are also linking into the Internet to reach counterparts in other organizations, specialized databases, and potential customers. Each month, some 2, 000 businesses join the more than 20, 000 that have already set up virtual shop on the Internet. Federal Expresss 30, 000 employees around the world are linked via the Internet to intranet sites within the companys Memphis headquarters; some 12, 000 customers a day track their own packages using Federal Expresss Internet Web site, rather than calling a human operator (Cortese). Ford Motor Company engineers in Asia, Europe and the United States worked together electronically to design the Taurus automobile. Pharmaceutical company Eli Lilly uses information compiled on its intranet sites to schedule clinical trials and submissions for approval of new drugs in countries around the world.
Visa International provides an information service called Visa Vue for its 19, 000 member banks on an internal Web site (Cortese). As electronic security improves, in the form of firewalls to prevent unauthorized access to private networks and encryption to protect the privacy of personal and financial data, more companies will use the Internet to sell products and services as well as to link their employees (Au). The Internet opens a global market to the small business and lets low budget nonprofit organizations reach interested parties across the country or the world. While Reuters and Dow Jones are repackaging financial information for electronic subscribers, a startup company in Silicon Valley called Quote Com is selling financial information over the Internet for as little as $ 10 per month. The Future Fantasy Bookstore in Palo Alto, California, put its catalog on the Internet and suddenly became a global firm (Thatcher). Telecommunications networks are creating a global information workforce, as employers seek the cheapest labor, ranging from clerical work, such as data entry, to software programming and research and development.
American Airlines uses key-punch operators in Barbados to enter data from its flight coupons, which are then fed by satellite and telephone lines back to Americans central computers in Tulsa, Oklahoma. American reportedly saved $ 3. 5 million on data processing in its first year. Mead Data Central, a provider of database services, hires overseas workers primarily in Ireland, the Philippines, and South Korea to enter documents in its databases. There are now at least seventy U. S. data processing firms with overseas facilities.
As demand for these services grows, users will need access to more bandwidth to speed searches, download software, and transmit video and graphics. Some telecommunications companies, such as AT&T and MCI, are becoming Internet service providers, concluding that the Internet must be viewed as an opportunity rather than a threat. Others fear that the Internet will steal traffic, as users opt for flat rate voice and video transmissions rather than paying for time or bits. Traditional telephone companies will have to respond to the demand for new and cheaper services as an opportunity rather than a threat if they are to survive. Rather than local monopolies providing telephone services over copper wires, in many countries we may find cable television companies, electric utilities and wireless operators competing with telephone companies to reach the end user, offering a combination of voice, data, and video services. Global information infrastructures (Gill) technological and economic trends have led policy makers to call for the construction of information highways linking communities and nations.
The phenomenal growth of the Internet as an information resource, communications tool, and electronic marketplace has focused attention on the need for national and global information infrastructure (NII and GII) to bring the Internet and other forms of electronic communications within reach of people around the world. Against this background, why all the hyperbole about electronic superhighways? Several themes recur in these information infrastructure initiatives. There are dual assumptions that converging technologies will result in information services with both social and economic benefits, and that both public and private sectors must be engaged to ensure the installation of national broadband networks. Yet these assumptions need to be carefully examined. Each new communication technology has been heralded as offering numerous benefits.
Satellites and cable television were to provide the courses taught by the best instructors to students in schools, homes and workplaces. Videoconferencing was to largely eliminate business travel. Telemedicine was to replace referral of patients to specialists. Computers were to replace traditional teaching with more personalized and interactive instruction (Schwankert, 112).
To some extent all of the prophecies have been fulfilled, yet the potential of the technologies is far from fully realized. In many cases, it took institutional change and incentives to innovate in order for these technologies to have much effect. In North America, the more remarkable change is in these incentives rather than the technologies. As school districts face shrinking budgets and new curricular requirements, as spiraling health care budgets are targeted by governments and insurance companies, and as business realizes that people must work smarter to compete in a global economy, they find new and compelling reasons to turn to telecommunications and information technologies. Thus, investment in technology alone will not likely result in major social benefits. Policymakers in these countries appear aware that public sector stimulus is needed to foster new educational and social service applications; there is widespread belief in the need to fund trials and demonstration projects (The Commission of the European Communities).
Yet seed money for pilot projects may not ensure long term implementation. Schools with International Services Digital Network (ISDN) access will benefit if the services they can access turn out to be cost-effective means of achieving their educational priorities. If the services are perceived as frills, or if there is no budget allocation to buy computers or pay monthly usage charges, connection to the information highway will mean little. Similarly, if insurers will not authorize payment for tele consultations, or physicians are not authorized to practice beyond their borders, tele medical applications will remain limited. And if prices for connection and usage are beyond the reach of low income and rural residents, small businesses and nonprofit organizations, the much-heralded information society will be very narrowly based.
The U. S. communications industry has adopted the banner of the information superhighway, with the assumption that there is an enormous new market in information services. While these applications are generally viewed in the United States strictly in business terms, in other countries cultural impact is also a major concern.
Both Canada and the European Union stress the need to use these networks to strengthen their own cultures (The Commission of European Communities). Yet, the proliferation of cable- and satellite-delivered channels in Canada and western Europe tells a different story: the demand for content is so great that operators turn to inexpensive sources of content to fill them, and this content is overwhelmingly American. Another recurring theme is the we will be left behind argument. In the late 1980 s, U. S. telephone companies sought to convince American policymakers that the United States was at a disadvantage because its citizens did not have Minutes, small computer terminals provided to...
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