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 The
revolution in information and communication technology (ICT), through
its various manifestations, has created a major impact on many aspects
of society. The internet, in particular, has had considerable influence
on how business is done. It has provided corporates and individuals
access to an unending storehouse of information from almost anywhere
in the world, on practically any subject. Access has become easier
and cheaper. E-commerce has transformed 'brick and mortar' companies
into 'click and mortar' ones. These developments have made real
the cliché of any information, anywhere, anytime, and through any
access device.
All this is made possible by information technology
and communications. While this has created new opportunities and
jobs, it has also led to the demise of certain functions. Technology
has brought the producer and consumer into direct contact. The consequent
elimination of middlemen has added a new buzzword to the internet
lexicon- dis-intermediation. In the hey-day of the dotcom boom,
a large number of entrepreneurs saw this as the sure-fire formula
for making millions. While the vast majority of such ventures have
fallen by the wayside, some-like Amazon, e-Bay and Baazee- have
survived and are thriving. These are basically based on direct contact
between buyers and sellers, cutting costs by eliminating intermediaries;
hence, dis-intermediation.
The ICT revolution has, however, another vital facet too: the so-called
death of distance or, more graphically, the end of geography. Advanced
communication technology has extended its reach so widely that no
longer is any place ''remote''. At the same time, costs have come
down so drastically that distance is no longer a variable in determining
communication costs. In fact, with satellite technology, the communications
path between any two points, whatever their geographical distance,
is practically the same. Little wonder then that an STD call will
soon cost only as much as a local call.
While most commentators have discussed this
macro aspect of new communications technology, little attention
has been paid to the crucial impact it will have at the micro level,
within an organisation. Business requires a number of functionalities.
These are combined into a single entity (an organisation) because
this is seen as the most efficient means of ensuring interaction
between them. Vertical integration, by coalescing backward or forward
linkages (oil refining with exploration, or with retail-level sales
outlets) is a similar attempt at reducing distance between different
operations and thus capturing greater amounts of the value chain.
What ICT has done is disrupt this model. The cost-including efficacy
and efficiency-of communication is independent of distance. Therefore,
the relative advantage of having all activities under one roof no
longer exists. On the other hand, as specific functions are handled
by specialised companies, they are able to get economies of scale
and efficiencies from specialisation. Thus, a production-oriented
company may completely outsource its marketing requirements. A marketing
company may contract out all its production like Coke has done.
This approach enables a company to focus and build on its basic
strength, or core competence.
As these trends accelerate, triggered by ever-newer
developments in ICT, organisations will have to disintegrate. Not
only will there be a huge increase in outsourcing-of which we are
beginning to see signs, and which is already benefiting the Indian
it industry-but companies will need to adopt this as a survival
strategy. Interestingly, those other, macro nodes of coalesced functionality-our
cities-too will face the same choice: disintegrate and disperse
the various elements, if you want to survive.
Prepare, then, for the organisation (corporate
and societal) of tomorrow: lean, mean and limited to core functions.
The age of the multi-functional behemoth, like the dinosaur, may
well be over.
These are the personal views
of author and not necessarily of NASSCOM. The author can be reached
at kkarnik@nasscom.org
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