CHAPTER 5

The Technological Revolution and Effects on Business

DIPLOMA IN INTERNATIONAL BUSINESS(BUS2513)

Early milestones5,000,000 BC

Physical body with brainstem and cerebellumNatural gifts and endowments of ancient biped hominids Looked out over and moved through their dominions of grasslands and savannahBinocular vision, opposable thumb, running, walking, climbing, reaching, grasping, handling

Brain development and three part brainBrain stem – governs basic requirements of life Cerebellum – governs movement, muscles, balance, co ordinationCerebrum – co ordinates thought, emotion, memory

Complexity evolves from interactions with community and environment

500,000 BCFire probably discovered as natural occurrence and they learned to carry it and re create it

Community and basic language developmentHunting and weapons….stone and metals, jabbing and throwing, dynamics of mass, location Food preparation, containers, implements

Early milestones2,000,000 BC

Need and insight drives innovation

Homo habilis first tools\artifacts for scraping, cutting and pounding

Evolvement into Sapien and our Prisca SapienteCollective knowledge of our past

200,000 BC onwards

Learning to speak and articulate ideasAware and thinking life remembering and acting, using our minds to thinkObservers, incorporating memories and participating in our culturesPeople, learning, endeavors, aspirations, lasting achievements

Lasting contributionsImportant discoveries and ideasImportant religions and founders and beliefs

Land for food productionfor geographical advantagefor water, minerals, gifts from the earth

Labourslaves, beasts, tenant farmerssoldiersguilds of producer providersmerchants and traders

Capital goods and inputs for basic goodsBasic tools, techniquesMetal, leather, wood, bone, stone, clay

Early economiesPost Ice Age 8,000 BC through Megalithic through Feudal age

Advances in Methods and techniques Materials Tools and technology

Early advancementswhat you do and what with

Passage of time and learningChanging conditions and circumstanceCapable individuals and milestones

Do not think our ancestors were dumb Great accomplishments in buildings maths, sciences, business, philosophy etc

Progression to modern times

From Feudal to Mercantile Exploration, navigation, metals and trade goods Need to move and transport goods and people Pulleys, levers, gears, screws, basic man powered machines Political organization still around kings and aristocracy and military Development of more socioeconomic classes and wealth

Seminal event Ghengis Khan, Kublai Khan and Cathay, led to Marco Polo Search for new trade routes as silk road control fragmented

Industrial revolution

Scientific principlesGeography and flora and fauna, metalsMachinery and locomotive powerUtilities, fuel, coalMore complex capital goodsMore complex production machineryNew materials, methodsWidening varieties of economic endeavor, markets

Political economic developmentDecline in ancient privileges in lands and government Economic thinking and theories and forms\how are resources sharedGovernment and economies

Technology revolution

More scientific discovery and uses and applicationsElectricity, oil, more forms of power to move objectsNatural resources, metalsMaterials, atomic structureRoad rail sea and sky vehiclesBiology, medicine, genetic codesEnvironment and geography and flora and fauna

Widening opportunities to provide thingsWell formed capital marketsWell educated human resources

Wide variety of economic endeavorMore complex ideas and concepts

Individual sector growth and advancement and complexity

Technology revolution

PlasticsAutomotive

PartsFilm &CD’s

Drugs

PaintsFoods &Flavours

ClothingBuildingMaterials

Soaps &Detergents

Forensics

MedicalResearch

Furniture Fertilizers Etc.Resins &

Adhesives

Modern Chemical Industry – variety of applications

STRATEGIC BREAKTHROUGHS

Energy and environment

This crucial field should see major breakthroughs as the energy/environment challenge reaches critical levels over the coming decades.

Space

Space Tourism may be the next major advance in this field, followed by Moon/Mars projects about 2020 and exotic technologies much later.

Manufacturing & Robotics

TechCast follows only a few selected technologies as yet, and they all cluster at mid-range when manufacturing matures.

Transportation

A wave of breakthroughs is likely to revolutionize transportation over the next 20 years

Medicine & Biogenetics

These forecasts show that medicine & biogenetics will take2-3 decades to realize the vast potential of the DNA revolution.

Major IT advances are likely to roll on for the next 2 decades, ending about 2020 with IT matures.

Information Technology

Ecommerce

These forecasts suggest that various commercial uses of E-Commerce should reach 30% adoption levels by 2015

All fieldswww.techcast.org Latest Strategic Analyses

Technological Revolution and Techno-Economic Paradigm (C Freeman and C Perez)First: Industrial Revolution; UK, 1771-1830Second: Age of Steam and Railway; UK, 1829-

1873Third: Age of Steel, Electricity, and Heavy

Engineering; US and Germany to Euro, 1875-1918

Fourth: Age of Oil, Automobiles and Mass Production; US to Euro, 1908-1974

Fifth: Age of Information and Telecommunication; US to Euro and Asia, 1971-20??

Fourth: Age of Oil, Automobiles and Mass Production: 1908-1974Mass production, mass markets, consumerismEconomies of scales (product and market volume)/

horizontal integrationStandardization of productsEnergy intensity (mostly oil-based)Synthetic materials (dyes, plastics, medicines)Functional specialization/hierarchical pyramidsCentralization/ metropolitan centers-suburbanizationNational powers, Int’l agreements and confrontation

Linear Innovation, Supply-sides dominate National, Bi-lateral, and International Human resource development

Constraints

Climate change/climate crisisEnvironment deterioration, pollutionWater and foods and other natural resourcesPerception by the general public of wide North-

South disparitySense of inequity, frustration, violence, identity,

etc,Growing human population ： 50% in last 25

yearsIs Our Society Sustainable?

Age of Information and Telecommunication1971-20?? Information-intensity (microelectronics-based ICT)Decentralized and integration / network structuresKnowledge as capital / intangible value addedHeterogeneity, diversity, adaptabilitySegmentation of markets / proliferation of niches/

brandingEconomies of scope and specialization combined with

scaleGlobalization/ interaction between the global and the

local Inward and outward cooperation/ power of clusters Instant contact and actions/ instant global

communications

Key Components of ICT

ComputingAll the hardware associated with gathering,

processing and storing data

TelecommunicationsThe glue of systems, brings them closer

together

Software developmentThe means of manipulating the hardware and

data

Co-Evolution of Key IT Components

Early models – Anthony’s model

Stages of IT/IS evolution in relation to expenditure – Nolan and Gibson

The Three-‘Era’ Model

Data Processing To improve efficiency1960s onwards

Management Information SystemsTo increase management effectiveness1970s onwards

Strategic InformationTo improve competitiveness1980s onwards

The Data Processing ‘Era’ (DP)

Automation of task/process through ITInvolves high volume of dataData capture, validation, storage and

transportEven today, more than 50% of IT

investment is focused on data processing

DP ‘Era’ - Internal to External View

Managing the IS/IT activities

Managing the IT/IS

Department

Relationships with other

departments

IS role in the Enterprise

Lessons learned from the DP ‘Era’

Developing of complete information systems, not just programs to process data

More analysis to improve system linkagesBetter planning of interrelated set of systemsCoordination of user and DP functionsAppropriate justification of investment

Management Information Systems ‘Era’ (MIS)Use of data for decision making purposesNew ways of manipulating data and data

analysisReturn-on-investments calculations not as

attractive for MIS than DP

MIS ‘Era’ - External to Internal View

Managing the IS/IT activities

Managing the IT/IS

Department

Relationships with other

departments

IS role in the Enterprise

Lessons learned from the MIS ‘Era’

Justification needs more than return on investment/financial analysis

Heavy user involvement for database restructuring projects

Need of IS source to move from production to service orientation

Need organizational policies

Strategic Information Systems ‘Era’ (SIS)Moving away from the traditional analysis

approach of deploying IT/ISThe ‘marriage’ of IT/IS investment with

strategic developmentEmphasis on competitive advantage and

competitive position

Summary of Trends in Evolution

The 3 Era Model seen today…

4th Era??????

You are not alone…

Computer Networks• A computer network is a system for communicating

between two or more computers and associated devices. It is an interconnection of computers for the purposes of sharing information and resources.

• A popular example of a computer network is the internet, which allows millions of users to share information

• Computer networks can be classified according to their size:– Personal area network (PAN)

– Local area network (LAN)

– Metropolitan area network (MAN)

– Wide area network (WAN)

Router

An example of a network

Internet

Segment Node

Hub

Hub

Bridge

Personal Area Network• A PAN is a network that is used for

communicating among computers and computer devices (including telephones) in close proximity of around a few meters within a room

• It can be used for communicating between the devices themselves, or for connecting to a larger network such as the internet

• PAN’s can be wired or wireless PAN’s can be wired with a computer

bus such as a universal serial bus: USB (a serial bus standard for connecting devices to a computer, where many devices can be connected concurrently)

PAN’s can also be wireless through the use of bluetooth (a radio standard designed for low power consumption for interconnecting computers and devices such as telephones, printers or keyboards to the computer) or IrDA (infrared data association) technologies

• A LAN is a network that is used for communicating among computer devices, usually within an office building or home

• LAN’s enable the sharing of resources such as files or hardware devices that may be needed by multiple users

• Is limited in size, typically spanning a few hundred meters, and no more than a mile

• Is fast, with speeds from 10 Mbps to 10 Gbps

• Requires little wiring, typically a single cable connecting to each device

• Has lower cost compared to MAN’s or WAN’s

Local Area Network

Types of Networks

Wide-area network (WAN) A network that connects local-area networks over a potentially large geographic distanceMetropolitan-area network (MAN) The communication infrastructures that have been developed in and around large citiesGatewayOne particular set up to handle all communication going between that LAN and other networks

Types of Networks

Local-area networks connected across a distance to create a wide-area network

LAN basics LAN’s can be either wired or wireless. Twisted pair, coax or

fiber optic cable can be used in wired LAN’s Nodes in a LAN are linked together with a certain topology.

These topologies include: Bus Ring Star Branching tree

A node is defined to be any device connected to the network. This could be a computer, a printer, a router, etc.

A Hub is a networking device that connects multiple segments of the network together

A Network Interface Card (NIC) is the circuit board that has the networking logic implemented, and provides a plug for the cable into the computer (unless wireless). In most cases, this is an Ethernet card inserted in a slot of the computer’s motherboard

The Network Operating System (NOS) is the software (typically part of the operating system kernel) that communicates with the NIC, and enables users to share files and hardware and communicate with other computers. Examples of NOS include: Windows XP, Windows NT, Sun Solaris, Linux, etc..

Types of Networks

Ethernet The industry standard bus technology for local-area networks

Network Topologies

Bus Topology Each node is connected one after the other (like christmas

lights) Nodes communicate with each other along the same path

called the backbone

Ring Topology The ring network is like a bus network, but the “end” of the

network is connected to the first node Nodes in the network use tokens to communicate with each

other

Backbone

Star Topology Each node is connected to a device in the center of the

network called a hub The hub simply passes the signal arriving from any node to

the other nodes in the network The hub does not route the data

Hub

Branching Tree Topology

Access Control Methods

Two primary access control methods exist for computers to communicate with each other over the networkToken based accessCarrier Sense Multiple Access with Collision

Detection (CSMA/CD)

Token based access

Used in bus and ring network topologies (token ring)Each computer in the network can only send its data

if it has the token. This prevents collisions that occur when data is sent at the same time over the network

The token is a special pattern of bits/bit in a frame that is directly detectible by each node in the network

A computer may only transmit information if it is in possession of the token

The message is sent to all other computers in the network

Types of LAN’s

The three most popular types of LAN’s are:Token ringEthernetFDDI (Fiber Distributed Data Interface)

Operation of token ring

As an example, suppose node # 1 wants to send information to node # 4 over the network

Initially, an empty frame (network packet) circulates in the network

1

2

3

45

6

Let’s see an animation of the token ring

CSMA/CD

Usually used in a bus topology Used in Ethernet LAN’s Unlike the token ring, all nodes can send whenever they have

data to transmit When a node wants to transmit information, it first “listens” to the

network. If no one is transmitting over the network, the node begins transmission

It is however possible for two nodes to transmit simultaneously thinking that the network is clear

When two nodes transmit at the same time, a collision occurs The first station to detect the collision sends a jam signal into the

network Both nodes back off, wait for a random period of time and then re-

transmit

A B C D

A B C D

A B C D

CSMA/CD

Collision

Ethernet

First network to provide CSMA/CDDeveloped in 1976 by Xerox PARC (Palo Alto

Research Center) in cooperation with DEC and Intel Is a fast and reliable network solutionOne of the most widely implemented LAN standards Can provide speeds in the range of 10Mbps- 10

GbpsUsed with a bus or star topology

Types of Ethernet LANs

10Base-T Operates at 10 Mbps IEEE 802.3 standard

Fast Ethernet (100Base-T) Operates at 100 Mbps

Gigabit Ethernet Operates at 1 Gbps Uses fiber optic cable

10 Gbps Ethernet Latest development of ethernet Uses fiber optic cable Developed to meet the increasing bandwidth needs of the LAN market

Wireless Ethernet IEEE 802.11 standard Operates at around 2.4 Gbps

Fiber-Distributed Data Interface (FDDI)

Fiber-Distributed Data Interface (FDDI) provides a standard for data transmission in a local area network that can extend in range up to 200 kilometers (124 miles).

The FDDI protocol uses as its basis the token ring protocol.

In addition to covering large geographical areas, FDDI local area networks can support thousands of users.

As a standard underlying medium it uses optical fiber (though it can use copper cable, in which case one can refer to CDDI).

FDDI uses a dual-attached, counter-rotating token-ring topology.

Fiber-Distributed Data Interface (FDDI)

An FDDI network contains two token rings, one for possible backup in case the primary ring fails.

FDDI has a larger maximum-frame size than standard 100 Mbit/s ethernet, allowing better throughput.

A small number of devices (typically infrastructure devices such as routers and concentrators rather than host computers) connect to both rings - hence the term "dual-attached".

Host computers then connect as single-attached devices to the routers or concentrators.

Types of Networks

Internet

A wide area network that spans the planet

So, who owns the Internet?

Internet Connections

Internet backbone

A set of high-speed networks that carry Internet traffic, provided by companies such as AT&T, GTE, and IBM

Internet service provider (ISP)

A company that provides other companies or individuals with access to the Internet

Internet Connections

Various technologies available to connect a home computer to the Internet

Phone modem converts computer data into an analog audio signal for transfer over a telephone line, and then a modem at the destination converts it back again into data

Digital subscriber line (DSL) uses regular copper phone lines to transfer digital data to and from the phone company’s central office

Cable modem uses the same line that your cable TV signals come in on to transfer the data back and forth

Internet Connections

Broadband

A connection in which transfer speeds are faster than 128 bps (bits per second)

DSL connections and cable modems are broadband connections

The speed for downloads (getting data from the Internet to your home computer) may not be the same as uploads (sending data from your home computer to the Internet)

Packet Switching

PacketA unit of data sent across a network RouterA network device that directs a packet between networks toward its final destination Packet switchingMessages are divided into fixed-sized, numbered packets; packets are individually routed to their destination, then reassembled

Packet Switching

Messages sent by packet switching

Take a message, break it into three packets, and simulate this process

Open Systems

A logical progression...

Proprietary system A system that uses technologies kept private by a particular commercial vendorInteroperability The ability of software and hardware on multiple machines and from multiple commercial vendors to communicateOpen systems Systems based on a common model of network architecture and a suite of protocols used in its implementation

Open Systems

Open Systems Interconnection Reference Model

A seven-layer logical break down of network interaction to facilitate communication standards

Each layer deals with a particular aspect of network communication

The layers of the OSI Reference Model

The Layers in the ISO/OSI RF ModelPhysical: Transmit raw bits over the medium.

Data Link: Implements the abstraction of an error free medium(handle losses, duplication, errors, flow control).

Network: Routing.

Transport: Break up data into chunks, send them down the protocol stack,receive chunks, put them in the right order, pass them up.

Session: Establish connections between different users and differenthosts.

Presentation: Handle syntax and semantics of the info, such as encoding, encrypting.

Application: Protocols commonly needed by applications (cddb, http,ftp, telnet, etc).

Network Protocols

Network protocols are layered such that each one relies on the protocols that underlie it

Sometimes referred to as a protocol stack

Layering of key network protocols

TCP/IP

Transmission Control Protocol (TCP)Software that breaks messages into packets, hands them off to the IP software for delivery, and then orders and reassembles the packets at their destinationInternet Protocol (IP)Software that deals with the routing of packets through the maze of interconnected networks to their final destination

TCP/IP

User Datagram Protocol (DP)An alternative to TCP that is faster but less reliablePingA program used to test whether a particular network computer is active and reachableTracerouteA program that shows the route a packet takes across the Internet

High-Level Protocols

Other protocols build on TCP/IP protocol suite

Simple Mail Transfer Protocol (SMTP) used to specify transfer of electronic mail

File Transfer Protocol (FTP) allows a user to transfer files to and from another computer

Telnet used to log onto one computer from another

Hyper Text Transfer Protocol (http) allows exchange of Web documents

Which of these have you used?

High-Level Protocols

Some protocols and the ports they use

PortA numericdesignationthat corresponds to a particularhigh-levelprotocol

MIME Types

MIME type

A standard for defining the format of files that are included as email attachments or on websites

What does MIME stand for?

Firewalls

Firewall

A gateway machine and its software that protects a network by filtering the traffic it allows

Access control policy

A set of rules established by an organization that specify what types of network communication are permitted and denied

Have your messages ever beenreturned undelivered, blocked by a firewall?

Firewalls

A firewall protecting a LAN

Network Addresses

Hostname A name made up of words separated by dots that uniquely identifies a computer on the InternetIP addressAn address made up of four one-byte numeric values separated by dots that uniquely identifies a computer on the Internet

Is there a correspondence between the parts of a hostname and an IP address?

Network Addresses

Class A: first byte network address and three bytes for host number

Class B: first two bytes for network address and two bytes for host number

Class C: first three bytes for network address and one byte for host number

An IP address is stored in four bytes

Where does the host number come from?

Domain Name System

Host numberThe part of the IP address that specifies a particular host on the network Yes, but what is it?Domain nameThe part of a hostname that specifies a specific organization or groupTop-level domain (TLD)The last section of a Domain name that specifies the type of organization or its country of origin

Domain Name System

e-web.uum.edu.my

Computer

nameDomain name

TLD

84

Domain Name System

Top-level domains, including some relatively new ones

Domain Name System

Organizations based in countries other than the United States use a top-level domain that corresponds to their two-letter country codes

Some of the top-level domain names based on country codes

Do you email

someonein another

country?

Domain Name System

Domain name system (DNS)

A distributed system for managing hostname resolution

Domain name server

A computer that attempts to translate a hostname into an IP address

The NEW Business Models

Brokerage Advertising Infomediary Merchant Manufacturer (Direct) Affiliate Community Subscription Utility

Brokerage Model

Brokers are market-makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary.

Marketplace Exchange -- offers a full range of services covering the transaction process, from market assessment to negotiation and fulfillment. Exchanges operate independently or are backed by an industry consortium. [Orbitz, ChemConnect

Buy/Sell Fulfillment -- takes customer orders to buy or sell a product or service, including terms like price and delivery. [CarsDirect, Respond.com]

Demand Collection System -- the patented "name-your-price" model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. [Priceline.com]

Auction Broker -- conducts auctions for sellers (individuals or merchants). Broker charges the seller a listing fee and commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. [eBay]

Transaction Broker -- provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal, Escrow.com

Distributor -- is a catalog operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners.

Search Agent -- a software agent or "robot" used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.

Virtual Marketplace -- or virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship marketing services. [zShops and Merchant Services at Amazon.com]

Advertising Model

The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.

Portal -- usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. [Yahoo!]

Classifieds -- list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee. [Monster.com, Craigslist, Match.com]

User Registration -- content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. [NYTimes]

Query-based Paid Placement -- sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture's trademark "pay-for-performance" model. [Google, Overture]

Contextual Advertising / Behavioral Marketing -- freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user's surfing activity.

Content-Targeted Advertising -- pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. [Google]

Intromercials -- animated full-screen ads placed at the entry of a site before a user reaches the intended content. [CBS MarketWatch]

Ultramercials -- interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [Salon in cooperation with Mercedes-Benz]

Infomediary Model

Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns. Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.

Advertising Networks -- feed banner ads to a network of member sites, thereby enabling advertisers to deploy large marketing campaigns. Ad networks collect data about web users that can be used to analyze marketing effectiveness. [DoubleClick]

Audience Measurement Services -- online audience market research agencies. [Nielsen//Netratings]

Incentive Marketing -- customer loyalty program that provides incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising. [Coolsavings]

Metamediary -- facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties. [Edmunds]

Merchant Model

Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.

Virtual Merchant --or e-tailer, is a retail merchant that operates solely over the web. [Amazon.com]

Catalog Merchant -- mail-order business with a web-based catalog. Combines mail, telephone and online ordering. [Lands' End]

Click and Mortar -- traditional brick-and-mortar retail establishment with web storefront. [Barnes & Noble]

Bit Vendor -- a merchant that deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web. [Apple iTunes Music Store]

Manufacturer (Direct) Model

The manufacturer or "direct model", it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. [Dell Computer]

Affiliate Model

In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well-suited to the web, which explains its popularity. Variations include, banner exchange, pay-per-click, and revenue sharing programs. [Barnes & Noble, Amazon.com]

Banner Exchange -- trades banner placement among a network of affiliated sites.

Pay-per-click -- site that pays affiliates for a user click-through.

Revenue Sharing -- offers a percent-of-sale commission based on a user click-through in which the user subsequently purchases a product.

Community Model

The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

Open Source -- software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [Red Hat]

Open Content -- openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [Wikipedia]

Public Broadcasting -- user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. [The Classical Station (WCPE.org)]

Social Networking Services -- sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [Flickr, Friendster, Orkut]

Subscription Model

Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. It is not uncommon for sites to combine free content with "premium" (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.

Content Services -- provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [Listen.com, Netflix]

Person-to-Person Networking Services -- are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [Classmates]

Trust Services -- come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [Truste]

Internet Services Providers -- offer network connectivity and related services on a monthly subscription. [America Online]

Utility Model

The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S.

Metered Usage -- measures and bills users based on actual usage of a service.

Metered Subscriptions -- allows subscribers to purchase access to content in metered portions (e.g., numbers of pages viewed). [Slashdot]