In the past few decades there has been a revolution in computing and communications, and all indications are that technological progress and use of information technology will continue at a rapid pace. Accompanying and supporting the dramatic increases in the power and use of new information technologies has been the declining cost of communications as a result of both technological improvements and increased competition. Based on Moore’s law the processing power of microchips is doubling every 18 months. These advances present many significant opportunities but also pose major challenges. Today, innovations in information technology are having wide-ranging effects across numerous domains of society, and policy makers are acting on issues involving economic productivity, intellectual property rights, privacy protection, and affordability of and use of information. Choices made now can have long lasting consequences, and attention must certanly be paid with their social and economic impacts.
One of the most significant outcomes of the progress of information technology is probably electronic commerce on the Internet, a fresh means of conducting business. Though only a few years old, it may radically alter economic activities and the social environment. Already, it affects such large sectors as communications, finance and retail trade and might expand to areas such as for instance education and health services. It implies the seamless application of information and communication technology along the whole value chain of a company that is conducted electronically.
The impacts of information technology and electronic commerce on business models, commerce, market structure, workplace, labour market, education, private life and society as a whole.
- Business Models, Commerce and Market Structure
One important method by which information technology affects work is by reducing the importance of distance. In lots of industries, the geographic distribution of work is changing significantly. For instance, some software firms have discovered that they can overcome the tight local market for software engineers by sending projects to India and other nations where in fact the wages are much lower. Furthermore, such arrangements can take advantage of that time period differences in order that critical projects can be worked on nearly around the clock. Firms can outsource their manufacturing to other nations and rely on telecommunications to keep marketing, R&D, and distribution teams in close experience of the manufacturing groups. Thus the technology can enable a greater division of labour among countries, which affects the relative demand for various skills in each nation. The technology enables various forms of work and employment to be decoupled in one another. Firms have greater freedom to locate their economic activities, creating greater competition among regions in infrastructure, labour, capital, and other resource markets. In addition it opens the entranceway for regulatory arbitrage: firms can increasingly choose which tax authority and other regulations apply.
Computers and communication technologies also promote more market-like kinds of production and distribution. An infrastructure of computing and communication technology, providing 24-hour access at inexpensive to almost any kind of price and product information desired by buyers, will certainly reduce the informational barriers to efficient market operation. This infrastructure might provide the means for effecting real-time transactions and make intermediaries such as for instance sales clerks, stock brokers and travel agents, whose function is to supply a vital information link between buyers and sellers, redundant. Removal of intermediaries would reduce the expense in the production and distribution value chain. The info technologies have facilitated the evolution of enhanced mail order retailing, by which goods can be ordered quickly by using telephones or computer networks and then dispatched by suppliers through integrated transport companies that rely extensively on computers and communication technologies to regulate their operations. Nonphysical goods, such as for instance software, can be shipped electronically, eliminating the whole transport channel. Payments can be done in new ways. The result is disintermediation throughout the distribution channel, with cost reduction, lower end-consumer prices, and higher profit margins.