e-Business & e-Government: Future requirements for trading information

e-Business & e-Government: Future requirements for trading information Presentation to the Ordnance Survey “Terra Future” Conference 20 September 2005 Prof. Jim Norton Senior Policy Adviser UK Institute of Directors Former Director UK Cabinet Office PIU e-Commerce team www.profjimnorton.com

Issues to be covered • Setting the scene - technological performance per unit cost continues to grow exponentially. • E-Business is now mainstream business… • Affordable broadband access: benefit and curse. • The 8 ‘C’s of e-business. • A novel use for geographical information? • Some final thoughts.

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.

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

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

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

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

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

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

Cooper’s law for wireless 43 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

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”

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

Mobility will drive the second half of the board… ….welcome to the world of m-business

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? The World produces more than 2 Exabytes (2 Billion Gigabytes) of unique information per year, more than 250 Megabytes for every man, woman and child on earth…

HG Wells’ prophetic vision of the future, The Shape of Things to Come, 1933 “It is remarkable to note how long mankind was able to carry on without any knowledge organisation whatever. … Nor was there any conception of the need of a permanent system of ordered knowledge, continually revised, until the 20th century was nearing its end. … [To those of an earlier age] our Fundamental Knowledge System … with its special stations everywhere … would have seemed incredibly vast.”

We have moved on from where this all started… With acknowledgement to the UK Office of the e-Envoy

A cartoonist sums it up beautifully… With acknowledgement to Roger Beale at the Financial Times - 13/3/01

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

Why is e-Business important? The e-business scope compass “When I took a look at Boeing’s interaction costs and discovered that e-enabling the business could save as much as 50%, I became an instant believer…” Phil Condit Chairman & CEO The Boeing Company - 2001 The e-business scope compass source: Mohanbir Sawhney - Kellogg Management School Northwestern University Chicago

Developing enterprise integration is a long climb… The further we climb up this ladder the more inter-working of disparate systems is required across both organisational and corporate boundaries. Now perhaps we need to climb it again to integrate online real-time geographical information UK has a significant advantage given the quality of information available… The ladder of e-business initiatives, source: Mohanbir Sawhney - Kellogg Management School Northwestern University Chicago

Resolution of the Solow productivity paradox Policy-makers and economists have long debated the role of information and communications technology (ICT) in the economy. The traditional view in the 1980s and 1990s was that its impact was limited. This was well characterised by the Solow Productivity Paradox that "you can see the computer age everywhere but in the productivity statistics". A confluence of new evidence based on analysis of US economic performance in the late 1990s demonstrates a strong inter-dependence and that ICT has had a substantial impact on GDP. This view has been supported by research by the EC that lies behind the claim by Erkki Liikanen, Commissioner for enterprise and information society, in October 2003 that "there is more and more evidence that the adoption of ICT is a key to productivity growth. In the US, it has been unusually robust, and has spread to the wider economy." Innovation in ICT has a transformational impact on productivity and growth - in the US, ICT produced an estimated one percentage point increase in yearly GDP growth in the late 1990s. Evidence and reasoned argument point to this productivity and growth improvement continuing for many years to come. Applying the same logic to the European economy, ICT could increase our future GDP growth rate from 2 per cent to 3 per cent. ICT can do to our economy in the 21st century what railroads did in the 1800s and electricity in the 1900s. Source: Andrew Heaney of Spectrum Strategy Consultants and Brian Williamson of Indepen, "Reaping the Telecoms Dividend" January 2004. Quoted in the Financial Times 18 Feb 2004

Integration of ICT systems with suppliers Whilst many companies now routinely interact online with suppliers (e.g. to order or pay for supplies or to track orders, only 20% have so far moved to tighter integration such as automated call off of orders Source: Business in the Information Age, International Benchmarking Study 2004 Page 85 UK Department of Trade & Industry / Booz Allen Hamilton http://www2.bah.com/dti2004

Integration of ICT systems with customers Similarly, whilst many companies now routinely interact online with customers (e.g. to accept orders and payments or to allow orders tracking, only 23% have so far moved to tighter integration such as automated replenishment of supplies. Source: Business in the Information Age, International Benchmarking Study 2004 Page 86 UK Department of Trade & Industry / Booz Allen Hamilton http://www2.bah.com/dti2004

Dramatic growth of broadband connections in UK There were 8.096M broadband connections in the UK at the start of June 2005. Connections are still being added at more than 60,000 per month Source: UK Ofcom Communications market update Aug 2005

ADAPT ABSORB ADOPT Benefit Time • Speed up processes • Fast always-on access for e-mail and web • Improved communications • Improved productivity • Improved staff satisfaction • Reduced costs • New processes • Address new markets • New business models • Outsource non-core functions • Reduce office space • Adapt processes • More efficient procurement • More flexible working • More e-Learning • Adapt sales & mktg. • Exploit VoIP Broadband impact on e-business processes Source: UK Broadband Stakeholder Forum

What quantifiable benefits are we seeing from business use of broadband access? 84.3% of respondents cite productivity improvements from broadband access. 64% of respondents see a direct link between broadband and increased profits. Source: UK/IoD Policy Unit survey on broadband access Oct 2004

Many respondents believe that broadband access brings very significant business benefits Better and faster R&D. Better information for decisions Can now do jobs we would not have contemplated four years ago. Couldn’t do business without it. Improved communications with/for outworkers Transforms way of working. Speed and ability to work anywhere in the World Quick access to worldwide web with huge increase in use at low fixed monthly cost. Source: UK/IoD Policy Unit survey on broadband access Oct 2004

What measures do you take to protect your home (or home office) PC against viruses and other security threats? There are still significant vulnerabilities with 10% of respondents not using a firewall and 23% not regularly installing security updates… Source: UK/IoD Policy Unit survey on broadband access Oct 2004

New models from Grid Computing and ASP? I suggest that processing will move into the network (along the model long highlighted by Sun and Silicon Image) where it can be fully and professionally protected. This will leave very thin clients (screen scrapers) only at the edge with little if any processing to infect. Software, processing and storage will be available on a pay per use basis - e.g. Application Service Provision (ASP). Recent research in the UK by IoD/Dell suggests that SMEs are now much more willing to consider an ASP model… This model powered by broadband access will greatly benefit small business…

Eight key landmarks to navigate by: • Customers • Creativity • Co-operation • Commitment • Charging • Competition • Culture • Cost The eight ‘C’s of e-business strategy...

Customers - serving them better... • Outsourcing cost to customers yet improving their satisfaction. • Developing ‘one to one’ marketing based on detailed customer profiles.

Outsourcing cost to the customer….Dell Source: http://www1.euro.dell.com/content/default.aspx?c=uk&l=en&s=gen

Outsourcing cost to the customer….Jali Source: http://www.jali.co.uk

Cost - driving it down through new approaches • Pushing stock holding elsewhere in the supply chain. • Increasing competition among sub-contractors • Enhancing logistics • Gaining cash flow at the expense of suppliers

The chemicals sector as an example... • Chem-etrade.comSpeciality chemicals marketplace • ChemSource.comIndex site… • GlobalBA.comSite that includes distributors • Lotsofplastics.comTrades surplus raw plastics • Chemmerce.comChinese chemicals marketplace • Bulknet.comBulk chemicals distribution logistics centre. • CheMatch.comCommodity chemicals exchange • ChemConnect.comAuction site • Chemdeals.comTrades off excess inventory • Chemdex.comTrades laboratory chemicals A darwinian process - all these sites were operating five years ago. Those in red italic are now gone or merged….

Evolution in B2B exchanges (1) In the B2B space, infomediaries – in the guise of the next generation of trade exchanges – will: • change the balance of power in entire sectors by aggregating the purchasing and selling power of large numbers of small companies; • foster (rather than destroy) supply chain relationships for collaborative development, innovation and the creation of ‘competitive edge’; • offer options to manage the risk associated with ‘just in time’ approaches to inventory management;

“Covisint” represented a key test case E-business is not about incremental improvement; e-business is a fundamental redesign of the enterprise. Web sites that offer incremental solutions for isolated aspects of your business do not enable you to reap the full benefits. Covisint will address your entire business, link you to the entire industry, and provide a foundation to accelerate you into operating at Internet speed. Source: www.covisint.com

Evolution in B2B exchanges (2) In the B2B space, infomediaries – in the guise of the next generation of trade exchanges – will also: • maintain online registers for the location of scarce resources or high value spare parts; • support escrow accounts as part of a payment offer in order to transfer payment upon agreed fulfilment; • develop anonymised and accurate market intelligence based on aggregated actual purchasing behaviour; • help to manage exchange rate risks; and • provide real-time on-line credit search for accreditation of third parties;

A novel use for geographical information? • A conundrum: The spectrum requirement for UK cellular communications services is forecast at 1270MHz (on a high traffic scenario) by 2015, compared to the 540MHz currently assumed to be available. • This is simply not available below the normal 3GHz limit assumed for “mobile” communications. It will have to be met from spectrum normal consider only useful for strictly line of sight communications… • An answer? The mobile phone can locate itself via GPS. If the mobile phone has access in real-time to geographical information (both landscape and “clutter” e.g. buildings), it can build a 3D map of its surroundings including awareness of the locations of all the available cellular base stations. The ‘phone could then actively steer beams from its internal antennae such that as it approaches a location shadowed from one base station it switches to another… • The implication… “Fixed” spectrum could be turned into “Mobile” spectrum - hugely increasing its value…. Source: Spectrum demand information from Analysys Mason “First Report for the Independent Audit of Spectrum Holdings - 1st September 2005. The rest - informed speculation!

Issues to be covered • Setting the scene - technological cost-performance continues to grow exponentially. • E-Business is now mainstream business… • Affordable broadband access: benefit and curse. • Can the existing model of highly distributed computing be made secure? • New models from Grid Computing and ASP? • Some final thoughts.

Some final thoughts…. • E-business has not gone away! The excess of gloom on the ‘downside’ was just as wrong as the earlier excess of ‘hype’. • Normal ‘Darwinian’ processes have removed from the market those who had wacky business plans and little common sense… • E-business is now being integrated into ‘traditional’ business, bringing major cost savings, service enhancements and new business opportunities. Secure interoperability is an essential element of these savings and improvements… • Affordable broadband access levels the playing field between large and small business but, combined with the fallibility of small office & home users, raises major security exposures. • Real-time access to geographical information represents a major new opportunity…

Oh dear…! But always remember that major change can sometimes have unexpected impacts….

Questions & Answers Slides can be downloaded from: www.profjimnorton.com/jnordsurv2.ppt

e-Business & e-Government: Future requirements for trading information