There has been a revolution within computing and communications over the last few decades, and all signs are that technological advancements and the use of information technology will continue to accelerate. The dramatic rise in power and usage of new information technology has been supported by the decreasing cost of communications due to technological advancements and increased competition. Moore’s law states that microchips have a processing power of doubling every 18-months. These advancements present significant opportunities, but also pose great challenges. Innovations in information technology have wide-ranging impacts across many areas of society. Policy makers are addressing issues such as economic productivity, intellectual property rights and privacy protection. They also address access and affordability. The social and economic consequences of decisions made now are long-lasting.
Electronic commerce over the Internet is a revolutionary way to conduct business. This is one of the most important outcomes of the advancements in information technology. Although it is only a few decades old, it could have a profound impact on economic activity and the social environment. It already affects large areas like communications, finance, retail trade, and may expand to education and health services. It refers to the seamless integration of information and communications technology throughout the entire value chain for a business that is conducted electronically.
Information technology and electronic commerce have a profound impact on the business model, market structure, work environment, labour market, education, society, and private life.
1. Market Structure, Commerce and Business Models
Information technology can be used to reduce the importance of distance. This is one important way that information technology can impact work. The geographic distribution of work in many industries is changing. Software companies have discovered that they can bypass the local shortage of software engineers by sending their projects to India and other countries where wages are lower. These arrangements take advantage of time differences to allow critical projects to be completed almost around the clock. Companies can outsource manufacturing to other countries and rely on telecommunications for close communication with their manufacturing teams. The technology allows for a more efficient division of labour between countries. This in turn can affect the relative demand for different skills in each country. Technology allows for different types of work and employment to be separated from each other. The technology allows firms greater flexibility in where they locate their business activities. This creates greater competition between regions for infrastructure, labour, capital and other resources. This opens up the possibility of regulatory arbitrage, where firms can choose which tax authority or other regulations to apply.