Sunday, 26 May 2013

internet business model Part 2.1; of economic cycles, are we there yet?

[This is a re-post (originally posted on 11 Dec 2012) with minor edits, deleted the original post by mistake.]

Information Technology started with the mainframe cycle that began with Colossus during the Second World War (1943) in England.  Commercialisation started in1951 with the delivery of the first commercial computer to the University of Manchester.  Skipping to the end, the leader of the mainframe era, IBM interestingly announced the end of the mainframe era last year.  Of course those in the IT industry already knew for two decades that the mainframe era is passé.  The cycle from commercialisation till 2012 is 61 years.  Now at the tail end of its laggard stage, the complete cycle is plausibly 100 years.  The leaders of that era NCR, Sperry, Wang, Univac are either gone or are not selling mainframes anymore except for IBM.  Its end was brought on by cheaper technology of the PC-LAN era lead by 3Com, Novell, Apple, Intel, Microsoft, Lotus and interesting the introduction of the IBM PC.  Anyone remember VisiCalc?

Starting in 1972 when Intel introduced the first microprocessor, the PC-LAN era has probably peaked.  Indicators?  The leaders of the era are dropping off.  3Com, Novell, Lotus are no more independent, sold to other companies and IBM sold the PC division that kicked off the PC industry.  When several leaders of a cycle losses influence it shows change.  But unlike the mainframe era where all except one leader remained, many other PC-LAN industry leaders are still around.  This implies the industry is at the early part of the late majority stage.  If this thesis is correct, it means the period of the PC-LAN era from commercialisation (early adopter stage) to the peak took roughly 40 years not dissimilar to the mainframe era.  Another indicator is the markets.  The PE ratio (stock market) of the PC-LAN era companies are some 20% that of the internet companies.  It shows the rise of the third wave of the IT industry, the internet era.  Again it is lower cost that is forcing the change.  As the PC-LAN industry is just off its peak, the internet industry must be on the rise, early on its early majority stage.  The iconic web companies, only starting to become profitable is one indicator of its cycle at the end of the early adopter stage and entering mainstream.  Whether it has entered mainstream or is close, only history can pinpoint to the year.  If the internet cycle is around mainstream, we could be at 30% of the cycle.  This has great implication for businesses and the socio-economy.  It means new opportunities for the untethered minds and a reordering of things, almost everything because unlike the other IT technologies, the socio-economic impact of the internet is far greater.  If you take a peek at the new-age companies, the online companies, you’ll see open plan offices with almost no partitions.  It reflects the open culture of the new economy.  This open culture as the reader will be constantly reminded in this column is the single most important dynamic in the internet economy.

The next column will discuss the internet business model.

LinkedIn – dr tommi chen

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