©Michael Borrus, 2003

Source: US Department of Commerce

US Industry Consumption of ITUS Industry Consumption of IT1940s-1990s1940s-1990s

©Michael Borrus, 2003

The US as Launch Market for The US as Launch Market for Networking and Use of ITNetworking and Use of IT

Enabled by domestic telecom deregulation/divestiture– 30 years of gradual deregulation of infrastructure to introduce

competition throughout = innovation– Boosted by deregulation of US service sectors (e.g., finance,

insurance, airlines, etc.)– Spurred by response to foreign competition in open US economy

Driven by industrial users– US industrial consumption of IT rose rapidly (previous slide)– By most metrics, US per capita use of computing and

communications leads all other nations (except in wireless!) Data networking is discontinuous with past

communication industry practices and business models

©Michael Borrus, 2003

Major Networking Major Networking DiscontinuitiesDiscontinuities

Technology: 3 Discontinuities– intelligent CPE, new transmission technologies (MW, digital,

wireless, fiber), packet switching, = multiple technical trajectories vs. unified, circuit-switched Bell system

– Digitization = flexible separation of ownership from control (next slide)

– Internetworking = flexible re-integration under end-user control Applications: 3 Discontinuities

– Radical growth in usage = data traffic matters– Radical shifts in usage = fundamentally new ‘traffic patterns’

require new network characteristics (next slides)– New applications support economic reorganization: Innovation is

driven by end-user (User-driven innovation = hallmark of internet)

©Michael Borrus, 2003

Flexibly Separable Management Flexibly Separable Management and Control Layerand Control Layer

application

infrastructure

application

phys. facilities

management and control

Bell System

Digital Networks Computing

HW Platform

OS/Middleware

applications

©Michael Borrus, 2003

distinct old media, different distinct old media, different communication patternscommunication patterns

live delayed

one-to-one

one-to-many

phone memo

live TV newspaper

Source: Francois Bar, 2000

©Michael Borrus, 2003

Internet: emergence of new Internet: emergence of new communication patternscommunication patterns

live delayed

one-to-one

one-to-many

“talk” E-mail

M-bone listserv

few-to-few

netmeeting

Web

one-to-few

few-to-manygroupware

“mixed times”

pointcasting

supplier auctioncooperative computing

Source: Francois Bar, 2000

©Michael Borrus, 2003

Discontinuous User-Centered Discontinuous User-Centered InnovationInnovation

Example: Business Data NetworkingExample: Business Data Networking Explosive Growth in Data Networks

– +10%-30%/mo. on Internet Backbone and Corporate Networks Entirely New Patterns of Use

– NOT extrapolation of past uses– Examples: cooperative computing, pointcasting, agents, applets

Source: Hewlett-Packard

©Michael Borrus, 2003

Network Deployment cycleNetwork Deployment cycle

1. automate

2. experiment

3. re-organize

IterativeCumulativeStructured

learningEmbedded knowledge

Path-dependent

Learning by doing

Learning by using

©Michael Borrus, 2003

Securities Industry ExampleSecurities Industry Example

Source: Manyika and Nevins, McKinsey (2003)

©Michael Borrus, 2003

Corporate Network GenerationsCorporate Network Generations

automateexperiment

re-organize

automateexperiment

re-organize

automateexperiment

re-organize

automateexperiment

re-organize

public network

private network

hybrid network

Web-based and out-sourced

1975

-85

1995

-?

1985

-95 ?

Source: Bar and Borrus, 2000

©Michael Borrus, 2003

Failures of implementationFailures of implementation

Much technology doesn’t actually work or work well enough (ERP, CRM)

Partial and abandoned implementationsFailure to focus on highest leverage areas

for productivity and new value-addedFailed to transform underlying business

processesFailure to experiment, learn, reorganize

©Michael Borrus, 2003

Successful PracticesSuccessful Practices Co-evolution of technology and business practices (know-how to

exploit = complementary asset) Ruthless focus on productivity improvement (especially reducing

costs of interaction for networked production structures) and/or new value creation

– Efficient IT asset management (efficiency of deployment)– Business Productivity and Value:

Reduce input for given output Increase output for given input Increase value

Sequential automation-experimentation-learning iteration; layering new on legacy that works

Reorganization (including, where necessary, planned cannibalization of working legacy infrastructure) and new cycle

©Michael Borrus, 2003

Building Sequentially Through Building Sequentially Through Automation, Learning, Experimentation Automation, Learning, Experimentation

and Reorganizationand Reorganization

Source: Manyika and Nevins, McKinsey (2003)

©Michael Borrus, 2003

Enterprise Spending –2002Enterprise Spending –2002(Rough Gartner Estimates)(Rough Gartner Estimates)

Source: Gartner Group, (2002)

©Michael Borrus, 2003

Now: Need to Manage ComplexityNow: Need to Manage Complexity

Complexity of high-end enterprise networks is out of control – Shift from investment (’95-2000) to productive

utilization of in-place assets– Creation of business value = ROI, top- and bottom-line

impacts IT vendor performance measured (and

compensated?) by improvement in customer business metrics– Back to the future: Increase in vertical industry

knowledge essential

©Michael Borrus, 2003

Future Trend: User-driven, Future Trend: User-driven, Automatic, On DemandAutomatic, On Demand

Edge user-driven ‘On demand’ functional capabilities

– Grid computing = aggregation of available cheap compute resources

– Self-organizing (allocating, configuring,optimizing), self-managing (diagnostics/healing)

– Virtual infrastructure services supplied as utility allocated on demand in real-time (OS, middleware, modular application services)

– Web services (on-demand applications thru web and other user interfaces)

But the reality is VERY far from the vision

©Michael Borrus, 2003

Evolution to On-demand Evolution to On-demand NetworkingNetworking

application

phys. facilities

management and control

Digital NetworksComputing

HW Platform

OS/Middleware

applications

Virtual PlatformConfiguration

(compute and com resources.)

Self-managing, Virtual OS/middleware

Infrastructure Services

(incl.application components)

End-user Interfaces,Tailored applications(Web Services, etc.)

On-demand Networking

©Michael Borrus, 2003

Comparative ICT Investment Comparative ICT Investment in OECD Countriesin OECD Countries

©Michael Borrus, 2003

Internet Usage MetricsInternet Usage Metrics

©Michael Borrus, 2003

Internet Adoption in EuropeInternet Adoption in Europe

©Michael Borrus, 2003

WEF Network Readiness WEF Network Readiness Index vs. Per Capita IncomeIndex vs. Per Capita Income

©Michael Borrus, 2003

Communications Access and Communications Access and Broadband PenetrationBroadband Penetration

©Michael Borrus, 2003

Phone vs. PC: A Tradeoff?Phone vs. PC: A Tradeoff?

©Michael Borrus, 2003

Consumer Broadband Consumer Broadband Market ProjectionsMarket Projections

                                                                                                                  

  

                                                                                                 

                   

                                                                                                  

                   

©Michael Borrus, 2003

Consumer/Small Business Consumer/Small Business BroadbandBroadband