Friday, February 8, 2013

The IT pendulum swing; the laws of economics

OK, I'm 'old' - old enough to have been in the IT industry since before my employer IBM launched the PC. But that gives me a useful perspective on what's going on.

It's a pendulum swing. Let me explain:

  • There's this principle known as Moore's Law which, simply put, means that each year we get more for less, in computing terms. Power and capacity grow consistently; while the costs of achieving it fall.
  • Then, there's a force of basic economics which means that the price a business can charge essentially falls to the cost of delivering the service. ('Marginal cost' economics)
  • Combine that with the blinkered, short-term quarterly results perspective of the stock exchanges and there's an inevitable conclusion...
The only way publicly-listed IT companies can maintain their share price and stock exchange expectations in the face of falling revenues for selling the same goods is to cause consumers to want ('need') to buy new goods that can be sold at a premium margin.

The result is that the IT industry has sold dumb terminals connected to mainframes; then mini-computers; then PCs; then PCs connected to LAN-based servers; then laptops; then Internet-connected laptops; now tablets... And cloud computing, which essentially treats PCs and tablets as dumb terminals connected to cloud-based 'mainframes' for data storage and processing! (To show the full-circle travel succinctly I've missed out a few nuances.)

Each of these has been some sort of step forward; but each transition has been marked by a bad-mouthing, pushing into obsolescence the technology that went before. The driver is not so much technology as economics and the need to fulfil the expectations of stock analysts for ever-growing revenues.

Expect cloud computing to remain as the hot topic for a while longer; but know it's not 'the end' and something else will be sold soon.

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