In the past few decades there has been a revolution in computing and communications, and all indications are that technological progress and use of information technology will continue at a rapid pace. Accompanying and supporting the dramatic increases in the power and use of new information technologies has been the declining cost of communications as a result of both technological improvements and increased competition. According to Moore’s law the processing power of microchips is doubling every 18 months. These advances present many significant opportunities but also pose major challenges. Today, innovations in information technology are having wide-ranging effects across numerous domains of society, and policy makers are acting on issues involving economic productivity, intellectual property rights, privacy protection, and affordability of and access to information. Choices made now will have long lasting consequences, and attention must be paid to their social and economic impacts.
One of the most significant outcomes of the progress of information technology is probably electronic commerce over the Internet, a new way of conducting business. Though only a few years old, it may radically alter economic activities and the social environment. Already, it affects such large sectors as communications, finance and retail trade and might expand to areas such as education and health services. It implies the seamless application of information and communication technology along the entire value chain of a business that is conducted electronically.
The impacts of information technology and electronic commerce on business models, commerce, market structure, workplace, labour market, education, private life and society as a whole.
Business Models, Commerce and Market Structure
One important way in which information technology is affecting work is by reducing the importance of distance. In many industries, the geographic distribution of work is changing significantly. For instance, some software firms have found that they can overcome the tight local market for software engineers by sending projects to India or other nations where the wages are much lower. Furthermore, such arrangements can take advantage of the time differences so that critical projects can be worked on nearly around the clock. Firms can outsource their manufacturing to other nations and rely on telecommunications to keep marketing, R&D, and distribution teams in close contact with the manufacturing groups. Thus the technology can enable a finer division of labour among countries, which in turn affects the relative demand for various skills in each nation. The technology enables various types of work and employment to be decoupled from one another. Firms have greater freedom to locate their economic activities, creating greater competition among regions in infrastructure, labour, capital, and other resource markets. It also opens the door for regulatory arbitrage: firms can increasingly choose which tax authority and other regulations apply.