"If 1980s were about quality and 1990s about re-engineering
then 2000s would be about speed"
By Dr. Javaid Leghari
Nov 04 - 11, 1999
Rapid advances in Communication and Information Technology (IT) have
changed the way we conduct business at the end of the twentieth century. IT today defies
all norms of business communication, and new codes and technologies continue to be
re-written and re-defined: e-mail, e-commerce, e-business, e-revolution. It appears as if
earth has been invaded by a superior race of cyber-aliens who wish to run businesses and
governments in their own way. And those who do not follow are to perish or eventually die
their own death, much like the dinosaurs. And it is the Internet which has led to this
It took 35 years for the telephone to reach a quarter of the US
population; 26 years for the television; 13 years for the mobile phone; but it took less
than 5 years for the Web to take over the world. If cars had followed the same
technological trajectory as computers, the cars of today would have cost less than $2000,
got about 42,500 km to a liter, and have a top speed of 14 million km per hour.
The industrial revolution of the 20th century, which the United States,
Japan and the Western World took advantage of, is now very much history. The present age
is the age of the IT, which is growing by leaps and bounds at the rate of 40% per year.
Today, within a growth period of less than 50 years, the global IT market is worth over US
$643 billion. The IT industries at Silicon Valley, a 80 km strip of land in California,
have a market value of $452 billion and account for the largest growth in US economy since
1993, surpassing even Wall Street valued at $405 billion, according to Business Week.
E-commerce has directly impacted upon the global economic growth. In
the 1400's, the global per capita income rose at only 0.1%. Over the next five centuries,
that rate moved steadily upwards, finally reaching 3% in the second half of the 20th
Century. Now it appears that the growth rate may average upto 5% in the 2lst Century. Why?
We have entered the Internet age, and finally arrived at the e-commerce. The evolution of
the Internet as a persuasive phenomena has meant that the traditional factors of
production, capital and skilled-labour, are no longer the main determinants of the power
of an economy. Today, the economic potential is increasingly being linked to the ability
of a nation to control and manipulate information. A recent study by the Italian Treasury
estimated that IT made up 3.6% of the American GDP vs. 2.9% in Japan, 2.4% in Germany and
1.5% in Italy.
The e-community is rapidly growing at an unprecedented rate. Internet
connectivity, world-wide, has surged from 27 million in 1996 to 50 million in 1997, 70
million in 1998, and has exceeded 97 million this year. It is projected that within the
next 5 years, by 2004, the connectivity will be more than double to 240 million.
The country with the largest number of Internet users today is USA,
with about 37 million on-line connectivity (in 1998). This figure is expected to exceed 67
million by 2003. Asian Internet users alone are currently estimated at 22 million but are
expected to double within the next two and a half years, and exceed 60 million in four
years (by 2003) surpassing even the number of US users by 2005. China is expected to be
the largest user in Asia (16 million). The projected number of users in India by 2003 is 8
million (currently under l million). On the other hand, Europe has over 14 million
Internet users and is expected to exceed 47 million by 2003. In other words, by 2003,
almost every household in the developed world with a PC, Television, Telephone or Personal
Digital Assistant will be connected to the Internet.
The most widely used application today is e-mail. It was earlier
believed that e-mail would be cold and impersonal and people could never develop
relationships on-line. In fact, the opposite has happened. Last year, the volume of e-mail
in the US surpassed the volume of hand delivered mail.
The number of e-mail messages sent on an average day in the US was 300
million in 1995, and is expected to exceed 3.5 billion this year. By 2002, the traffic
will total 8 billion messages a day.
From its initial usage of sharing of research and exchange of data,
e-mail and surfing, the Internet is increasingly being used today for e-commerce.
E-commerce is defined as any form of business transaction conducted
electronically using the Net. E-commerce has many advantages: It allows companies to
streamline business processes; it reduces costs in the face of global competition; it
provides market value-added services; it forges more profitable links to suppliers and
customers around the world, it improves effectiveness in terms of widening market
potential; and it creates globalization. The disadvantages of e-commerce, on the other
hand, are privacy loss; censorship; transaction security; vendor reliability; getting
customers to the Net; and customer retention. However, with the development of secure
transmission of credit information, transactions are now playing an increasingly larger
part in Internet activity.
Although in its infancy, e-commerce promises to dramatically alter the
structure and processes of commerce. E-commerce managers will have to invent new business
modes that reemphasize scale, differentiation, and brands to compete effectively on the
electronic infrastructure. With low transaction costs, they will also have to spend
substantial time redesigning transaction processes and participating in industry groups to
develop new e-commerce conventions. Effectively implementing these strategies and
simultaneously reconciling new and existing business modes will be the key to a firm's
An irony of the Net is that it is a marketplace with low barriers to
new entrants, but only if you get there first. It can uproot established business.
Two years ago, Yahoo Inc. was still a web search index. Since then, it
has evolved into a major media company that commands a $40 billion market capitalization.
Money losing startups such as Amazon.com and e-Toys Inc. today command multi-billion
dollar market caps, and have an edge over mega-stores like Barnes and Noble and Toys R US.
Amazon.com last year posted sales of $1.2 billion, equal to about 235 Barnes & Noble
super stores. Intel today is the largest on-line seller with sales exceeding $1 billion a
month. Within three years, world-wide on-line business-to-consumer retail sales are
estimated at $ 184 billion.
Six industries are expected to have the greatest impact of e-commerce
on the network: Computing & Electronics, Telecommunications, Financial Services,
Retailing, Energy, and Travel. The combined e-business of these industries today is
estimated at $110 billion. By 2003, the estimated business to e-business is of the order
of $1.25 trillion.
The Banking industry has also joined the e-revolution, and many banks
are already operating on-line. According to Merill Lynch, the banking industry's average
cost per transaction at the branch is about 51.07, 54 c on the telephone and 27 c at an
ATM. Today, on the Internet, this cost has further reduced to l c per transaction. It is
estimated by the Banking Industry that by year's ends 3 million US households will have
on-line accounts, with $374 millions in deposits. By 2003, there will be 9.7 million
households with on-line accounts totaling $3 billion. On-line mortgage loans are also
expected to grow from $18 billion in 1999 to more than $91 billion in 2003.
Nowhere has e-revolution had a greater impact than on capital markets.
European merchant bankers used carrier pigeon networks in the 18th century to get an edge
on their rivals. Because of the telegraph and the telephone, stock trading in the
nineteenth century went from a local business to a national one dominated by Wall Street.
In 1980, the world stock of equities, bonds, and cash totaled some $11 trillion; by 2000,
these assets will total $78 trillion. The stock market activity on the Net has already
risen due to e-agents. By next year, robot shoppers, or automated shopping agents (called
'bats') will crawl the net, not only searching out the best deals on behalf of the buyers,
but will also be authorized to make purchases if they find the right price and features.
All these e-development will severely impact on the availability of
trained personnel. It has become obvious today that for companies on the Internet, the
resource in the shortest supply will be neither raw material nor capital, neither powerful
technology nor new markets.
Capital can be accessible and smart technologies easily copied.
However, talented people will be the prime source of competitive advantage. The world
economy will go through a seismic shift from capital investment to intellectual capital.
By 2003, attracting and retaining people in IT will be the number one force in strategy.
The number two strategy for competitive advantage will be human resource training and
development, as the half-life of technology will keep growing shorter all the time.
Where does Pakistan stand in all this e-revolution in the global world
of IT? Nowhere! Very few quality graduates are produced each year. The telecommunication
infrastructure is very poor both in terms of bandwidth and tariffs, and is highly
regulated. The electric power infrastructure is also very poor in terms of outages,
fluctuation and surges, damaging or even necessitating the use of expensive equipment
worth millions of rupees. There is very little domestic consumption of IT. Outsourcing has
been hindered due to lack of infrastructure, high tariffs, and shortage of trained
There have been some recent positive developments. The Government of
Punjab has signed two separate but similar agreements with Microsoft and Oracle for
training of software professionals. Microsoft has committed $150 million worth of software
and training materials to produce 5,000 Microsoft certified professionals per year.
Similarly, Oracle has committed $13.5 million in the form of free software and course
materials to train 1,000 Oracle certified professionals.
So as e-commerce flourishes, we must all take initiatives to join it
because there is no turning back. In the end only the 'connected' will survive. Pakistan
can choose to either become e-literate or become extinct. The choice is ours.
Dr. Javaid Leghari is the Project Director of SZABIST