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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference

 

 Clyde Prestowitz giving presentation to CDI...

 

Steve Olson teaching trade negotiations at the Mekong Institute...

 

Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(02/10/05) Robert Cohen in Information Age, London

Robert Cohen in Information Age, London (02/10/05)
The Business Challenge.


Modern enterprise networks are changing - and changing fast. Most modern enterprises are now replacing their patchwork of often incompatible networks with a faster, seamless and standardised one that carries all data and voice.

At the same time, many are aiming to seamlessly integrate mobile services, to use "presence" technologies to maintain persistent online links with employees, to build secure services for remote workers, and to invest in new tools, like collaborative working and e-learning to boost productivity.

They also plan to overhaul their data centre and applications. Ultimately, they hope that web services will enable their applications to interlink and communicate easily, enabling much more productive and easy interworking and outsourcing. Emerging technologies, like virtualised data centres and grid, should eventually enable more flexible, cost-effective computing.

All this amounts to a major revolution in networked computing, presenting huge business challenges to executives at user organisations. With the waste and disappointment of the dot.com excess still fresh in many minds, businesses will need to make huge investments and make difficult architectural and supplier choices.

This time round, however, the business case is easier to make. Case studies and return on investment analyses show Voice over IP providing such a powerful return that the first stage of many investments can be easily justified, even on a large scale.

Organisations such Lloyds TSB, Abbey, Lloyd's of London, Carphone Warehouse, and dozens of government departments, have all committed to large investments. But the IP revolution is about more than this. Converged IP networks enable flexible applications and services to be embedded in the wide area network, providing what Alcatel calls "Business process productivity" - the ability to complete end-to-end transactions and processes without interruptions, and sometimes, human involvement.

Such are the power of these IP services, that, combined with higher bandwidth, many see a fundamental change taking place. George Gilder forecast in his book Telecosm that the emergence and adoption of powerful, flexible networks would herald the end of the computer. Eventually, almost all intelligence would pass from the client device into the so-called "telecosm".

His forecasts were perhaps a bit dramatic. Nevertheless, data networking giant Cisco has laid down the gauntlet with a blueprint for the future of the business networking - the Intelligent Information Network. Its business strategy is modeled around the view that more and more intelligence, applications and business processes will be handled by the networking devices, such as routers and switches, through which almost every transaction will pass.

"What was running at the computer layer will increasingly run at the network layer," says Nick Earle, VP of marketing, planning and operations for Cisco, EMEA.   This means that rules, policies, security and some business processes - along with a whole array of network services - will be managed and run at the network layer.

The business and architectural challenges of this approach are profound for vendors and customers alike. Networks built in this way will take on more systems management and middleware functions - a move that potentially puts Cisco into competition with some of its partners. While Cisco insists that it doesn't want to be become a "middleware" vendor, it will increasingly encourage customers to put more power in the middle, carrying out network management, business activity monitoring.

Cisco's view is that customers building converged IP networks will want to do so using componentised, standardised, network services. A good comparison might be the way in which the application server has revolutionised business systems development.

As Mario Mazzola, Cisco chief development officer, explains in a white paper: "We are implementing an array of support functions common throughout the infrastructure, ones needed by many applications, whether that's a wireless point of sale device, an IP telephone, or a corporate database.

These functions include network-embedded services such as security, storage, voice and wireless, as well as packet layer services, such as routing, content awareness, encryption and traffic shaping".

Most other network equipment vendors agree, to an extent, with Cisco's view, seeing a business opportunity to take a pivotal role in corporate computing. But there may be tension and incompatibilities between suppliers, as some middleware systems and certain point solutions all compete for a role in the converged network.

There are huge challenges involved. While the bedrock of converged IP networks is largely based on open standards, the complexities involved in building intelligent networks may be of a different order - enabling the outsourcing of more critical functions.

Networks and productivity

Throughout the 1980s and 1990s, technologists, economists and thinkers have put forward the argument that ubiquitous, low-cost, high-speed connectivity would lead to huge leaps in productivity, not just for businesses, but for society as a whole.

Among them, Robert Metcalfe (co-inventor of Ethernet and the inventor of "Metcalfe's Law") forecast that productivity would leap as more people connect to the network. George Gilder, the economist and futurist, saw cheap bandwidth as an unstoppable, revolutionary force as important as the power of the processor.

Robert Cohen, an economist and fellow of the US Economic Strategy Institute, argued there is a direct link between bandwidth and productivity, and influenced both European and the US governments to invest in broadband.

Many organisations, among them BT and Cisco, have sponsored academic research exploring the positive economic impact of greater connectivity.

To date, all these arguments have been persuasive (and widely accepted) but difficult to prove, for all kinds of reasons. But one of them has been that there is simply too little real-world empirical evidence. However this is starting to change.

Whole economies, such as Finland, Norway and Singapore, have illustrated the economic benefits of advanced, high bandwidth networks. There is mounting evidence that, while a good Internet infrastructure benefits companies, there are still greater business benefits to be had from building sophisticated, flexible networks.

The study Net Impact: United States Private Sector, for example, found that US organisations using best practices and "a co-ordinated system of sophisticated networks, re-engineered processes and Internet business applications" achieved a four to five times greater improvement in productivity than those just using Internet business applications. This translated into a 20-25% advantage in operational productivity.

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Latest Publications


The Betrayal of American Prosperity.


The Trans-Paific Partnership and Japan.


Making the Mexian Miracle.


Industrial Policy and Rebalancing in the US and China.


The Evolving Role of China in International Institutions.

 

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