Building the networked economy

By Daniel Briere
Network World, 03/29/99

In the last several columns, we've discussed the Application Service Provider (ASP) and one important subset of this group, the Broadband Enabled ASP. We've made bold statements that ASPs have the potential to change the balance of power in the telecom industry and change the relationship between service providers and customers. What would drive these dramatic changes?

History paints the late 20th century as the evolution of the Information Age into the Communications Age. Today, we are in the early stages in the evolution toward a networked economy.

One attribute of a networked economy is that everything is connected all the time. In 15 years, we will only notice the network when it's not there. Another attribute is that every industry, starting with the telecom industry, will undergo a realignment that changes the way customers interact with suppliers.

The connectivity part of a networked economy is the most straightforward. Connecting everything to the net requires an abundance of low-cost chips and bandwidth, and global wireless and wireline communication systems. We can say with confidence that in the near future, there will be a class of chips so inexpensive that they will be disposable.

Stop right now and look around you. Imagine everything you see has at least one chip built into it. Everything. Ask yourself what the company that makes, distributes or uses that product might gain if that item could send just one small bit of information about itself back to the manufacturer, distributor or buyer.

Think about your firm's business. Right now the net you build is designed to handle relatively small amounts of data compared to the traffic that would be generated if every product your company creates had an embedded chip. That chip could send a message saying it has just been shipped, put on a store shelf, purchased, consumed, moved, used, broken or whatever. We're talking about a lot of data!

This traffic creates a problem. There might be value in continually collecting and aggregating all these bits of distributed data. But to make use of this, you will need access to a lot of bandwidth, everywhere and anywhere, for a much lower price than you pay for bandwidth today. Moreover, you will need systems and applications designed to exchange, distribute, manage and extract information from the data being collected.

This is where industry realignment begins to be evident. Words such as "deconstruction" are used to describe what happens when you get a high degree of specialization and division within an industry.

If the telecom industry deconstructs in a similar way, we will see service providers fragment and specialize. At the polar ends are the super carriers that concentrate on providing wholesale capacity and the ASPs that provide products for specific groups of users.

Sooner or later your own industry will go through a similar transition. Integrating the network and your business is at the core of this transition.