IT Usage Working Group

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IT Usage Working Group

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IT usage is increasing at enormous pace

• The boom in the information technology (IT)
  services industry is continuing at a steady pace.
• In 1998, worldwide demand for IT services
  approached 270 billion, which constituted a 13
  increase over 1997.
• The industry is expected to exceed 400 billion
  by 2002.
• It will remain one of the most significant growth
  industries well into the millennium.
• Source Donald, Lufkin Jenrette, Technology
  Services

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Internet usage is increasing at an even greater
pace

• More and more people are using the net.
• 1994 only 3 million people used the internet.
• 1998 more than 100 million people use the
  internet.
• This number could grow as high as 1 billion in 5
  years time.
• Traffic on the internet has been doubling every
  100 days.
• E-commerce is expected to grow 300 billion US by
  2002.
• Source EITO 99

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The rapid change can be seen by changes in
spending patterns

• In the US, in the 1960s business spending on IT
  equipment represented only 3 of capital
  investment.
• In 1996, ITs share increased to 45.
• In 1997, ITs share constituted 56 of all US
  venture capital investments.
• Source EITO 99

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The growth in all 5 sectors has been driven by 5
factors.

• Demand is driven by the following factors
• Y2K (short-term)
• Electronic commerce
• Enterprise Resource Planning
• Liberalization of global telecommunications
  markets
• Convergence

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Y2K (short-term)

• Y2K (short-term)
• Constitutes a very large maintenance task, which
  requires a review of all or most applications,
  and has immovable deadlines for completion.

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Electronic commerce

• E-business uses information technology to conduct
  business transactions among buyers, sellers, and
  trading partners to improve customer service,
  reduce costs, and increase shareholder value.
• The worlds leading organizations are reorienting
  themselves around electronic business, or
  e-business.
• Pioneering efforts are little more than five
  years old, yet e-business initiatives and
  start-up companies are transforming entire
  industries and becoming a general phenomenon.
• E-business promises to define what will be the
  ground rules for the 21st Century.
• Forrester Research predicts that electronic
  commerce could reach 327 billion by 2002, while
  IDC predicted a market 400 billion by 2002.
• These forecasts are based on the prediction that
  320 million people will be accessing the World
  Wide Web by 2002.
• Source PricewaterhouseCoopers E-Business
  Forecast, Standard Poors

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Enterprise Resource Planning

• Enterprise Resource Planning (ERP) is typically
  characterized as high-end enterprise software
  applications that automate back-office business
  processes to help manage a corporations
  day-to-day operations.
• These processes include manufacturing,
  distribution, accounting, and human resources.
• The major vendors are SAP, Peoplesoft, Oracle,
  Baan and J.D. Edwards.
• IDC estimates that
• The worldwide ERP consulting and integration
  services market is expected to grow at compound
  annual rate of 17
• The client/server segment will exceed 25 annual
  growth over the next five years and
• The United States ERP education and training
  market, which was 770 million in 1997, will
  exceed 30 annual growth over the next five
  years.
• Standard Poors

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Liberalization of global telecommunications
markets

• Liberalization of telecommunications markets has
  taken place at the international and national
  levels.
• On 5 February 1998, the agreement on basic
  telecommunications (the Fourth Protocol to the
  General Agreement on Trade in Services)
  negotiated at the World Trade Organization (WTO)
  came into effect.
• This agreement resulted in schedules of services
  commitments to provide specific levels of access
  to trade in each members market.
• Liberalisation at the international level has
  resulted in rapid change at the national level.
• Many governments have carried through with two
  related tasks the reform of existing
  telecommunication legislation and the creation of
  new regulatory agencies.
• Many formerly insulated domestic markets have
  opened to new operators.
• Incumbent telecommunication operators have
  undergone ownership transformation.
• OECD Communications Outlook 99

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Convergence

• Convergence constitutes
• The combination of telecommunications,
  broadcasting and information technology
  infrastructures, systems, services and
  industries and
• The creation of an integrated environment which
  can offer interactive multimedia applications and
  a broad range of new media services.
• Convergence is taking place between IT,
  telecommunications and traditional media.
• Over the next 10 to 15 years, a new
  communications market will emerge in which the
  current IT, telecommunications and
  publishing/broadcasting markets are integrated.

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Global Drivers of IT

• The major customers creating this demand are
• Government,
• Financial/Insurance Services,
• Healthcare Information Services,
• Manufacturing, and
• Education.

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The customers - Government

• Around the globe, government is a major customer
  of IT goods and services.
• In the US, the Federal Government is the
  industrys largest single customer.
• Governments require IT for traditional system
  integration, management of information systems,
  technical assistance in network management,
  satellite communications, software for mission
  critical systems, intelligence, and aerospace.
• The internet also provides new IT opportunities.
• The internet can be used for the on-line
  submission of tax returns, electronic voting, and
  publication of public information.
• Internet makes it easier for citizens to interact
  directly with their elected representatives.
• However, public sector demand is not keeping pace
  with private sector demand.

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The customers - Financial/insurance services

• The Financial and Insurance services industry are
  large consumers of IT.
• The demand for IT is a result of the increasing
  need
• To fulfill data processing needs
• To set-up, install, and maintain a network of
  automated teller machines or funds transfer or
  currency exchange systems
• To provide debit and credit card services and
• To assist with remittance processing.
• Finance is one of the first industrial sectors to
  see the potential of the internet.
• Many banks already have websites and allow simple
  transactions to be performed over the web.
• This results in the provision of banking services
  at a far lower cost than with either traditional
  or telephone banking.

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The customers - Healthcare information services

• Information systems are needed to compete
  successfully in this rapidly changing, highly
  regulated industry.
• There are huge savings to be made in healthcare
  from managing information electronically, and
  from using computerized patient records.
• The internet provides new ways to deliver
  healthcare.
• Also diagnostic information can be transferred
  electronically to allow for consultation with
  another specialist.
• Security remains a major issue.

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The customers - Manufacturing

• The Manufacturing industry also is a major
  consumer of IT products and services.
• Computer services vendors provide manufacturers
  with
• Advanced capabilities in information processing
  and management,
• Document processing,
• Inventory control,
• Material handling, and
• And various process control systems.

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The customers - Education

• The development of multimedia and multicasting
  technologies will have a profound effect on the
  education sector.
• The internet represents an excellent opportunity
  to overcome the current resource constraints
  faced by many universities and schools.
• In this new environment schools will need more
  computers.
• Source EITO 97

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Internet provides a new channel for marketing and
distribution
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The Enabling Effect Hypothesis
Competitive Enhancement
Wealth Creation
Quality of Life Improvements
LEVEL 5 IT-Based New Concepts and Paradigms
LEVEL 4 IT-Enabled Strategic Management
LEVEL 3 IT-Dependent New Products
LEVEL 2 Quality Enhancement
LEVEL 1 Cost Reduction
TIME
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The Enabling Effect Indicators

• LEVEL 1 Cost-Reduction
• 1 Reducing Energy Output
• 2 Reducing Material Output
• 3 Reducing Transport Costs
• 4 Reducing Labor Input

• LEVEL 2 Quality Enhancement
• 5 Minimizing Maintenance
• 6 Minimizing Breakdowns
• 7 Short Delivery Delays
• 8 Eliminating Product Defects
• 9 Closing Client/Product Expectations Gap

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The Enabling Effect Indicators

• LEVEL 3 IT Dependent New Commodities
• 10 New Products
• 11 New Services

• LEVEL 4 IT - Enabled Strategic Management
• 12 Computer-Designed Ergonomics
• 13 Enhanced Internal Communications
• 14 Enhanced External Communication
• 15 Management Information Systems
• 16 Strategic Marketing
• 17 Increased Management Velocity

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The Enabling Effect Indicators

• LEVEL 5 New Concepts and Paradigms
• 18 IT - Dependent Quality of Life
• 19 New Concepts
• 20 New Paradigms

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The Enabling Effect Indicators - Critical Lessons
Learned

• Importance of Communications Network
  Infrastructure
• Role of Business Re-engineering
• Importance of Integration
• Data Timeliness and Quality
• Government and Industry Informationizing
• Enhanced External Communications
• Government and Industry Co-operation
• Working Environments and Skill Levels
• Elusive Benefits of New Concepts and Paradigm
  Shifts
• Radical Nature of Paradigm Shifts

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Demand for IT Services in specific jurisdictions
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South Africa

• Population (million) 41
• GDP (million) 129,094
• GDP growth 1.7
• GNP per Capita 3,210
• telephone mainlines 107 per 1000 people
• cost of 3 minutes local call US 0.07
• personal computers 41.6 per 1000 people
• internet hosts 34.02 per 10,000 people
• high tech exports -- of manufactured exports
• Source World Bank website

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IT Spending is closely related to GDP