IT INDUSTRY SEGMENT FUNDAMENTALS While for many the IT industry is well understood for the purposes of this book, we shall roughly describe its topology. The IT industry has evolved into an exceptionally diverse series of companies, firms, and corporations, which can be simply classified into the industry's three basic segments—hardware, software, and communications. Hardware Hardware can be divided into three subsections. -
Hardware— Always the most visible elements of the IT industry. When many people see a box they think it's a computer. Hardware can be broken down further into subcategories of IT systems, such as mainframes, servers, workstations, and their related components, such as microprocessors and storage devices. -
Peripherals— In this subcategory are classified printers, scanners, and other external devices, which provide overall functionality for IT systems. -
Data Communications— The hardware that allows IT systems to communicate with each other, such as classify modems, routers, switches and network hubs in this subcategory. Hardware enterprises engaged in manufacturing are often faced with the known challenges of designing and assembling equipment. However, there are key differences because most hardware firms are engaged in highly specialized design and development and are required to bring their products to the marketplace in ever faster cycle times. In addition, hardware firms employ a higher percentage of skilled, qualified engineers and designers than non-IT manufacturers. The line between hardware and software is becoming increasingly blurred as hardware firms now construct and develop software embedded in their products to make them more efficient or to enable a given functionality. The term "middleware" is used to describe such products. Global IT spending on hardware exceeded $410 billion in 2002 and is projected to average 4.3 percent growth to over $459 billion by 2005.[5] Software Software is seen by many as the driving force behind the entire IT industry. It creates new opportunities in other industry segments such as hardware. Subcategories are as follows: -
Corporate— The software needed to manage corporations will include custom-designed applications as well as off-the-shelf software packages, whose sales have exploded in recent years. -
Consumer— This subcategory covers software such as word processors, email programs, spreadsheets, and many other types used by the individual consumer. -
Utilities and Languages— This category defines required software development tools for managing data, the necessary operating systems and languages with which we have become familiar, such as COBOL, and more recently Java, C++, and others, to generate and manage corporate software. It is software that is the medium for doing all the new things in computing that hardware makes possible—whether simple numeric calculations or increasingly sophisticated functions like symbolic processing, graphics, simulations, and artificial intelligence. As the IT hardware industry has experienced rapid growth in the corporate, consumer, and general markets, so too has the software industry. Analysis of software growth has shown several cycles in software acceptance over the last 50 years—from the monolithic days of COBOL and FORTRAN in the 1950 and '60s to acceptance of IBM's PL/1 (Programming Language 1). Then in the early 1980s came the emergence of Fourth Generation Languages (4GLs) and CASE (Computer Aided Software Engineering), where corporate applications could be generated from diagrams and specifications. With the acceptance of the personal computer, there came client/server applications, and subsequently the Internet came bolting out of the academic world to unite hardware and software. With so many great software development tools and standard yet rigorous methods of software generation, a software industry of enormous diversity and scalability has emerged. One person and a PC can create fabulously successful software with the potential for worldwide sales. Linus Torvalds, the creator of Linux, is a case in point. At the other end of the spectrum, vast programmer farms churning out highly specialized code for corporate software exist in abundance. IBM, Microsoft, Sun, and Texas Instruments are examples. Innovation is a key aspect of the software industry. While quantifying innovation is notoriously difficult, two useful proxies for measuring innovation are investments in research and development (R&D) and the impact of new products on users. By either measure, the commercial software industry is highly innovative. For instance, in 1998, the U.S. software and computer services industries invested an estimated $14.3 billion in R&D, which exceeded the level of R&D spending by the U.S. motor vehicles, pharmaceuticals, and aerospace industries combined. Furthermore, innovations in software have enabled businesses across the economy to become more productive. As a recent study by the U.S. Department of Commerce concluded, innovative new software programs have enabled firms "to create extraordinary efficiencies and improve decision making within their own operations and supply networks." Software vendors have made enormous strides on standards and sharing of data—once a severe obstacle to growth. The result of these innovative efforts is that literally hundreds of thousands of off-the-shelf hardware and software products on the market today can communicate and exchange data. Further evidence of these efforts can be seen in the IT systems of large enterprises, which often include a range of hardware, software, and platform products from several different vendors. Sharing data between the disparate elements of these systems typically would have been difficult or impossible only seven or eight years ago. Now, industry efforts to promote open standards—including support for the Internet as a common communications layer—have helped to create an environment today in which data can be shared among most elements of these IT systems with much greater ease. Communications Communications was once considered an unrelated stand-alone industry, but data and networks have become more integrated, leading to what is now a vital part of the IT industry. The communications segment of the IT industry now provides a mix of both hardware and software, integrated into products along similar lines as software. Subcategories include: -
Corporate— Offerings for the management of high volume and high bandwidth networks that transport data at very high speeds to customers and consumers alike. -
Consumer— Individuals are now are able to log on to high speed networks and the Internet from anywhere they choose. -
Utilities— Products that monitor and control networks, routers, security, traffic, and other essential elements of telecommunications. Indeed, the merger of IT and telecommunications, now regarded as an integral part of IT, is almost complete. Since the early 1990s, as the Internet emerged as the primary engine of growth for IT innovation, the telecommunications industry has begun to benefit substantially. The PC revolution has transformed the IT industry, giving users access to data anywhere in the world. Starting with a minority share, Internet traffic now exceeds international voice traffic by volume and is expected to constitute more than half of all telecommunications by the end of 2004.[6] For much of the last 50 years, most countries have had to rely on a single telecommunications provider. AT&T in the United States and British Telecom in the United Kingdom are two examples. Telecommunications deregulation started in the early 1980s and became widespread during that time, with 1982 seeing both the breakup of AT&T into the seven "Baby Bells" and the introduction of a second carrier in the UK. Deregulation of labor and product markets also became common in the 1980s, and these processes of deregulation have been adopted in varying degrees in developing countries during the 1990s. Because of their monopoly and the regulatory framework, the large single carriers were insulated from any significant competition and had little incentive to lower prices or strive for network improvements and innovation. Thankfully for consumers and corporate entities alike, this framework of single provider regimes has been dismantled and all customers now have many choices. Governments can best achieve the growth of affordable high bandwidth telecommunications services at lower costs to the customer by eliminating those practices that impede innovation and competition. Consumers will benefit the most if competing providers are free to offer a wide range of services. |
