In recent decades there has been a revolution in information technology and communications, and everything indicates that technological progress and the use of information technology will continue at an accelerated rate. Accompanying and supporting the dramatic increases in the power and use of new information technologies has been the falling cost of communications as a result of both technological improvements and increased competition. According to Moore’s Law, the processing power of microchips doubles every 18 months. These advances present many important opportunities, but they also pose great challenges. Today, innovations in information technology are having far-reaching effects in many domains of society, and policymakers are taking action on issues related to economic productivity, intellectual property rights, protection of privacy and affordability and access to information. Choices made now will have lasting consequences and attention must be paid to their social and economic impacts.
One of the most significant results of the progress of information technology is probably electronic commerce through the Internet, a new way of doing business. Although it is only a few years old, it can radically alter economic activities and the social environment. It already affects sectors as large as communications, finance and retail and could expand to areas such as education and health services. It involves the seamless application of information and communication technology throughout the value chain of a business that is conducted electronically.
The impacts of information technology and electronic commerce on business models, trade, market structure, the workplace, the labor market, education, private life and society as a whole.
1. Business models, trade and market structure
One important way that information technology is affecting work is by reducing the importance of distance. In many industries, the geographic distribution of work is changing significantly. For example, some software companies have found that they can beat the tight local market for software engineers by sending projects to India or other nations where salaries are much lower. In addition, these arrangements can take advantage of time differences to be able to work on critical projects almost 24 hours a day. Companies can outsource their manufacturing to other nations and rely on telecommunications to keep marketing, R&D and distribution teams in close contact with manufacturing groups. Thus, technology may allow a finer division of labor across countries, which in turn affects the relative demand for various skills in each nation. Technology makes it possible to unlink various types of work and employment. Firms have greater freedom to locate their economic activities, which creates greater competition between regions in markets for infrastructure, labor, capital, and other resources. It also opens the door to regulatory arbitrage: A+ Certification Cost companies can increasingly choose which tax authority and other regulations apply.
Computers and communication technologies also promote more market-like forms of production and distribution. An information and communication technology infrastructure, which provides low-cost, 24-hour access to almost any type of price and product information desired by buyers, will reduce information barriers to efficient market operation. This infrastructure could also provide the means for real-time transactions and make intermediaries, such as sales clerks, stockbrokers, and travel agents, whose role it is to provide an essential information link between buyers and sellers, redundant. The elimination of intermediaries would reduce costs in the value chain of production and distribution. Information technologies have facilitated the evolution of enhanced mail-order retailing, in which products can be ordered quickly over telephones or computer networks and then shipped by suppliers through integrated carriers that rely on rely heavily on computers and communication technologies to control their operations. Non-physical goods, such as software, can be shipped electronically, eliminating the entire transportation channel. Payments can be made in new ways. The result is disintermediation throughout the distribution channel, with cost reduction, lower prices.