new it - a paradigm shift

edcent

New IT – A Paradigm Shift White Paper

October 2012

1 | New IT – A Paradigm Shift © 2012 Edcent Technologies

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Introduction Information Technology has played a very important role in the transformation of global economy. This role, however, has gone through a long evolution of products and systems. Till 1960, the role of information systems was simple. They were mainly used for electronic data processing (EDP), transaction processing and record-keeping. The post 1960 period saw the introduction of report based systems that helped business owners and managers in the decision making process.

In the 1980s, the introduction of personal computers at workplace and home empowered individuals with the enormous potential of computers. This change in computer usage gave way to the rapid development of semiconductor industry led by Intel and packaged software industry led by Microsoft. Moreover, the introduction of standard internet protocol suites (TCP/IP) led to the emergence of an interconnection of information systems called the Internet.

In mid to late 1990s the long standing problem of an integrated set of software applications that would cater to the needs of most businesses was solved by Enterprise Resource Planning (ERP) systems. ERP systems integrated all aspects of an organization, including customer relations, planning, manufacturing, sales and resource management – virtually every business function. The Late 90s also witnessed the invention of Web Mail that not just introduced one more use of computers, but became the primary reason for adoption of computers at a larger scale. As internet and web-mail became commonplace, a large number of users worldwide adopted computers as their tool of choice for communication and collaboration.

The new millennium came up with an entirely new set of software solutions which would build upon the fundamental structure of the internet. Software applications such as Search Engines analyzed the vast pool of information available on internet and made that information easily available to the masses. Further, mid 2000s saw the rise of social networking and e-commerce phenomenon that introduced new and innovative uses of computers. These and many other new found uses of internet have led to some fundamental changes to the way computers and software applications are designed. The most prominent of these changes are the widespread adoption of touch interfaces and the delivery of software as a service, developed and deployed through an open market.


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Exhibit 1 shows the evolution of information systems during last five decades. During every decade since 1950, major technological changes were introduced that transformed the way information systems were built and used. The last decade observed the emergence of companies that would leverage the internet in order to build innovative solutions that are still influencing the human-computers relationship.

MainFrames

1950-1970

Personal Computers (PC), Packaged

Software

1977-1990

Internet, Enterprise Resource Planning

(ERP), Web Mail

1990-2000

Search Engines, Social Networking, e-commerce

2000-2010

Exhibit 1 From mainframes to social networks Evolution of information systems 1950-2010


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The IT evolution discussed in previous section can also be described from the user interface and device usage perspective. Exhibit 2 shows how various computing devices have evolved over last three decades - from text based, keyboard/mouse driven tools to touch panel based, multi-media rich devices. Further, the technical evolution in software and hardware technologies has also brought some very important behavioral changes to the user-computer interaction such as the shift in primary purpose of computers from content creation to content consumption - as observed in case of modern tablet PCs and smart phones (Exhibit 2).

Text

Graphics

Touch

Keyboard

Mouse

Fingers

Create

Communicate

Consume

Exhibit 2 From text to touch Evolution of user-interfaces, input devices and device usage


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“..the evolution has touched every aspect of the information systems. We have come a long way from text based user

interfaces to touch panels; from using keyboards and mouse to our fingers; from content creation to content consumption.”


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It’s a fact that today’s IT systems have been developed after decades of research, development and large scale implementations but they still perform the same basic tasks that they used to in the mainframe era i.e. gathering, processing and presenting information. If that’s true then what’s going to take these systems to a new level? Is it the widespread use of hand held devices or the cloud based applications reaching out to businesses and individual consumers alike?

“Last five decades, from 1960-2010, have brought tremendous changes to the way humans produce and consume information.

Decade of 2010 also started with some very promising upgrades to the old systems. As we progress into 2013, we’ll observe further changes

in the way information systems are designed and used.”


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New IT – A Paradigm Shift New IT defines the modern systems in place or under development to help us consume and produce information. What’s new about New IT is that it brings enormous changes to the way we have been using networks and computers to fulfill our communication and computing needs. New IT comprises of various entities that are currently helping us achieve the next level of information and communication technology systems. It is to be noted here that though some of these entities have already been in place for years, introduction of complimentary changes and the eventual amalgamation of various such entities have given birth to a larger, highly integrated and ubiquitous system that is now prevalent in our day-to-day lives. New IT, thus, relates to every sub-system, product, solution or service that plays a role in delivering the aforementioned modern information system.

In specific terms, New IT relates to the development and adoption of various IT entities such as:-

1. Cloud Computing and IT Commoditization 2. Mobile Data Networks 3. Smart Connected Devices 4. Modern Software Applications including Big Data applications

In further sections, we will define various features of New IT and explore how exactly New IT can change the way we build and use information systems.


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MainFrames

1950-1970

Personal Computers (PC),

Packaged Software

1977-1990

Internet, Enterprise Resource Planning

(ERP), Web Mail

1990-2000

Search Engines, Social Networking,

e-commerce

2000-2010

Cloud Computing, Smart Connected Devices, LTE, Big

Data

2010-Future

Exhibit 3 Information systems - 2010 and beyond


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Three Pillars of New IT - Efficiency, Integrity and Ubiquity

Three main features define New IT – Efficiency, Integrity and Ubiquity. While efficiency defines various cost and operational efficiencies achieved through the use of New IT, integrity relates to the completeness of information systems achieved through end-to-end integration of numerous sub-systems. Ubiquity means the anytime anywhere anydevice availability of systems and data.

Efficiency High Output

Low Cost Better Resource

Utilization

Integrity Seamless Integration

Excellent Service Delivery Easy System Management

Ubiquity Anywhere Connectivity

Anytime Availability On any device

Exhibit 4 Three pillars of a modern information system


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“New IT brings three fold changes to traditional information systems – it increases the operational and cost efficiencies,

integrates various sub-systems to deliver a seamless computing experience and facilitates true mobility”


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Efficiency

Through the effective use of New IT, businesses and individuals can achieve greater efficiencies in terms of cost, output and resource utilization. Moreover, the efficiency pay-offs of New IT are not just limited to customers but benefit the entire commercial ecosystem by facilitating better quality of service at reduced costs.

The gains to business customers can be explained from two perspectives. First, the technological capability (infrastructure, platform, software) at the disposal of various small and medium businesses willing to adapt to New IT is enormous. For example, only a very small number of SMBs have the knowledge and expertise to install and manage commercially available ERP and CRM packages. By shifting from on-premise infrastructure to cloud based solutions, these companies can leverage the vast reserves of technical capability provided by their cloud vendor, without worrying about the associated deployment and maintenance complexities.

Second, the contractual structure made available by subscription-based solutions brings two-fold cost advantages to the customers: a) It removes the initial large scale expenditures incurred in building an on-premise IT infrastructure and b) It brings down the running costs of an enterprise grade IT infrastructure by 25-50%. In this way, use of New IT results in huge capital surpluses that can be used by enterprises for other business activities.

“..the efficiency pay-offs of New IT are not just limited to customers but benefit the entire commercial ecosystem by facilitating better

quality of service at reduced costs”


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Integrity

Traditionally, system integration has enjoyed a special attention from an IT system perspective. In fact, one of the main purposes achieved by IT evolution has been the integration of various systems in order to deliver an enhanced computing and communication experience. New IT adopts a new approach towards this critical aspect of information systems. New IT identifies various ingredients of a modern IT system and gels them together in a seamless fashion. Every component of a New IT system is integrated in a way that underlying complexities of the system are hidden from the end user. For example, the Software as a Service offering takes the burden of managing the inherent infrastructure and software off the end user. On the other side, in a centrally secured environment, the handheld and light weight terminal devices are as much a part of the enterprise system as the server infrastructure. This high level of integration consolidates the otherwise dispersed sub-systems, thereby delivering an easily manageable and highly scalable system.

Further, such high level of integration creates room for the development of innovative software applications that can leverage the vast pool of data generated by various information systems. Famously referred to as Big Data, these vast reserves of data can be easily analyzed and manipulated by using the immense compute power and storage facility made available by highly integrated New IT systems.

“New IT identifies various ingredients of a modern IT system and gels them together in a seamless fashion”


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Ubiquity

Ubiquity is one aspect of New IT that equally touches all three dimensions of an information system i.e. hardware, software and network. Although, software and hardware infrastructures have made good progress in the last decade, the data networks have lagged behind in delivering business grade IT capability over a network that is available throughout a wide area. New IT identifies LTE (Long Term Evolution) and LTE Advanced as a solution to this problem. With the downlink speeds of up to 299.6 Mbps (LTE) and 1 Gbps (LTE Advanced) users will not have to depend on wired networks to access their virtual desktops or a SaaS application.

Further, the web based delivery models of various software and infrastructure solutions has enabled businesses to consume the enterprise applications over internet. The wide spread use of handheld devices is also encouraging a shift from bulky and stationary terminal devices to lightweight and mobile devices.

“Ubiquity touches all aspects of information systems – (portable) hardware, (web-based) software and (mobile) network”


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Some fundamental questions arise at this point..

“To what extent has New IT realized its three features?

What are the adoption rates for various New IT systems?

What benefits have users availed so far?”


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The Current Scenario

In previous sections we discussed how IT systems have evolved over time and what may be a logical upgrade for them. We also questioned the state of traditional IT systems and highlighted various benefits brought forth by New IT vis-à-vis it’s three main features – efficiency, integrity, and ubiquity. While it’s true that traditional IT systems have strived to achieve efficiency, integrity and ubiquity, they have struggled to provide all these features in a transparent - under one roof - fashion. Moreover, the quality of service has not been as good as that achieved through New IT. Broadly speaking, traditional IT has not yet been able to achieve what is famously been termed as (true) on-the-go computing. With virtualization and remote computing, traditional IT began providing such an experience but it has been anything but truly mobile; given the various system and network bottlenecks. Another important aspect that traditional IT has failed to address is the delivery of technology as a service. The natural shift of commoditization that took place in power and telecom industry has long been sought for IT as well but issues such as data security, scale and good quality wide area networks have kept this desire from getting realized. New IT is catering to all these issues and more. Let’s see how.


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Smart Connected Devices

The last 2-3 years have seen a sky rocketing growth in the adoption of handheld devices such as tablets and smart phones (Exhibit 5). What implications might it have on existing systems? Firstly, the behavioral change in the usage of computing devices has fueled the wide scale installation of modern mobile data networks such as 3G and LTE. Secondly, the high penetration rate of handheld devices has led enterprise grade applications to emulate applications (apps) based software consumption.

Exhibit 5 shows global shipments for computing devices (Desktops, Laptops, Smartphones and Tablets). The smart devices (tablets and smartphones) accounted for 70.3% of the total device shipments in 2012 and will witness a staggering growth rate of 95.9% (for smartphones) and 131.2% (for tablets) over the four year period of 2012-2016.


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Source: IDC Worldwide Quarterly Smart Connected Device Tracker, December 10, 2012

Exhibit 5 Smart Connected Device Market by Product Category & Market Share 2012-2016


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There will be an upward demand bias in case of tablet computers. The demand for tablets will stay high in developed markets but significantly higher in China. (Exhibit 6)

11%

15%

16%

18%

20%

21%

41%

0% 15% 30% 45%

U.S.

France

Japan

Germany

UK

International Demand

China

Source: Morgan Stanley Research, AlphaWiseSM

Exhibit 6 Extreme Interest in Purchasing a Tablet over the Next 12 Months


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While tablets are currently used for content consumption through activities like web browsing, social networking and watching videos, there will be an upward trend towards content creation (only 20% of the tablet owners use the device to create or edit files) as new mobile applications and faster processors become available (Exhibit 7).

Source: Morgan Stanley Research, AlphaWise

SM

Exhibit 7 Tablets Geared Towards Content Consumption Percentage of Users who use the device regularly for each activity


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The widespread use of tablets has also led to reduction in overall time spent on PCs. We believe that this trend will take PC usage to a further low as tablets become more powerful and rich with more productive mobile applications (Exhibit 8).

1% 2% 3% 2% 3% 2% 3% 5% 2% 3% 10% 13% 11% 11% 18% 22% 25% 24% 23% 30% 32%

64% 65% 66% 66% 64% 49%

60% 56% 50% 55%

56%

25% 21% 21% 21% 16% 26%

12% 16% 16%

13% 9%

InternetConnected

TV

Samrtphone Internet toTV Player

GPS GamingConsole

PortableGamingConsole

PortableMedia Player

eReader Netbook LaptopComputer

DesktopComputer

Do not use it anymore Using less frequently than before Same as before Using more frequently than before

Source: The Nielsen Company, Q1 Mobile Connected Device Report

Exhibit 8 Tablets impacting device usage Impact of New Tablet Purchase on Use of Other Devices


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An interesting trend that has been observed is the enterprise adoption of tablet PCs (Exhibit 9). 2/3 of the companies in 2012 agreed to allow the use of tablets in the secure enterprise systems. A rather encouraging 51% of them would take the lead in buying tablets for employees while 16% would allow the use of employee owned tablets. Interestingly, this emerging trend has made terms like BYOD (Bring Your Own Device) commonplace.

21%

51%

8%

16%

71%

33%

0% 20% 40% 60% 80% 100%

Currently

In One Year

Purchase for Employees Allow Employee Owned Tablets on Network Do Not Allow

Source: AlphaWiseSM

CIO survey

Exhibit 9 Tablets being adopted in 2/3 of Companies Surveyed Tablet Usage Trend in Enterprises


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Cloud Computing

Cloud Computing forms the backbone of the New IT systems as it replaces the traditional IT infrastructure and applications. Cloud computing, offered in three variants viz Infrastructure, Platform and Software, is a promising solution to resolve the issues related to scale and maintenance of enterprise grade systems while minimizing the overall cost of owning such systems.

From implementation standpoint Cloud is provided in three ways:-

Private: The underlying infrastructure is used by a single customer. Public: A centralized infrastructure is used to deliver cloud solutions to a number of customers. Hybrid: A combination of private and public clouds where some applications are deployed on public cloud while other, usually more critical, remain on a

private cloud.

“Cloud Computing changes the way users pay for IT infrastructure. It also changes the amount of computing power and storage capacity

available at users’ disposal along with the time in which such facilities can be procured and put to active use.”


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Exhibit 10 shows the global cloud adoption rates. SaaS stands first when three types of cloud offerings are compared. In fact, the ongoing investment in IaaS and PaaS are mostly led by the increasing interest in SaaS. The increasing use of SaaS can be attributed to the high level of abstraction it provides as compared to IaaS and PaaS.

21

25

37

54

8

14

23

35

5

9

17

29

2009 2010 2011 2012

SaaS adoption

IaaS adoption

PaaS adoption

Source: Forrsights Software Survey; Enterprise and SMB Software Survey, NA and Europe

Exhibit 10 SaaS leading the Cloud Adoption Cloud computing adoption rates 2009-2012 Percent of respondents


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Exhibit 11 shows software application wise adoption of cloud based solutions. The majority of cloud adoptions will come from Customer Relationship Management (CRM) applications, Web, e-commerce and office collaboration tools. We believe that the adoption of cloud based solutions will be uneven with some public/hybrid cloud based applications finding widespread adoption while others staying on private cloud or on-premise systems.

46

42

35

22

19

18

10

21

Customer relationship management

E-commerce/Web

Collaboration

Supply chain

Other

Development/testing

Tier 1 line of business

Average

Other applications include weighted average for content management, other lines of business, data warehouse, operations, ERP, engineering and IT applications Source: McKinsey CIO/CTO Cloud Online Survey; Gartner-McKinsey Analysis

Exhibit 11 Companies migrating to the cloud in some areas more than others CIOs surveyed on application migration Percent expecting migration to public/hybrid cloud by application

Customer-facing and employee-productivity applications will lead

migration to the cloud


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Exhibit 12 shows the cost advantages achieved by cloud based offerings in case of small and medium businesses. The cost advantage provided by cloud solutions as it benefits small and medium businesses will account for almost one-fourth reduction in standalone application ownership (through SaaS) and a-half in case of raw infrastructure (through IaaS).

Exhibit 12 Cloud's growth driven by favorable economics for SMB customers

Source: McKinsey Analysis


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Big Data

Big Data refers to the large sets of data generated by traditional and existing data systems. These data sets are difficult to capture, store, analyze and present, due to their enormous size. The emergence of Big Data is mainly attributed to the increasing number of people interacting with data or information. There are 4.6 billion mobile-phone subscriptions worldwide and there are between 1 billion and 2 billion people accessing the internet. Between 1990 and 2005, more than 1 billion people worldwide entered the middle class which means more and more people who gain money will become more literate which in turn leads to information growth. The world's effective capacity to exchange information through telecommunication networks was 281 petabytes in 1986, 471 petabytes in 1993, 2.2 exabytes in 2000, 65 exabytes in 2007 and it is predicted that the amount of traffic flowing over the internet will reach 667 exabytes annually by 2013.

New IT is influencing both the generation and management of big data in a profound way. As the high level of infrastructure scales (storage and processing power) are achieved, the maintenance and usage of big data will become easier. The use of big data offers huge untapped potential for value creation. Many organizations and governments can leverage big data to improve the allocation and co-ordination of human and physical resources, cut waste, increase transparency and accountability, and facilitate the discovery of new ideas and insights.

“..as high level of infrastructure scales (storage and processing power) are achieved through New IT, the maintenance and usage of Big Data

will become easier.”


http://en.wikipedia.org/wiki/Telecommunication

http://en.wikipedia.org/wiki/Petabytes

http://en.wikipedia.org/wiki/Petabytes

http://en.wikipedia.org/wiki/Exabytes

http://en.wikipedia.org/wiki/Exabytes

http://en.wikipedia.org/wiki/Exabyte

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Exhibit 13 Big Data numbers - Volume, Velocity, Variety

Source: 1 IBM, bringing big data to the enterprise 2 McKinsey Global Institute "Big Data: The next frontier for innovation, competition, and productivity." May 2011 3 Global Pulse "Big Data for Development-Opportunities and Challenges" May 2012 4 IDC, "Worldwide Storage Services Opportunity for Big Data 2012-2016 Forecast" 2012

25 quintillion bytes

Amount of data generated every day through online or mobile financial transactions, social media traffic, and GPS, among other sources.1

90%

Share of the world's data created in the last 2 years

2

1.5m

No. of additional data-literate managers and anlysts needed in the U.S. by 2018

3

20

No. of months it is expected to take for digital data to continually double between now and

20203

$3.3m

Estimated revenue for worldwide BigData storage services by 2016

4

By 2015, nealry

3 billion people

will be online, pushing the data created and shared to nearly

8 zettabytes


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The Exhibit 14 shows the Big Data value chain and the role New IT solution providers can play in creating and leveraging this value. As seen, New IT vendors will have an important contribution to three chief stages of the Big Data value chain – generation, aggregation and analysis of data.

Source: McKinsey Global Institute analysis

Exhibit 14 Big data constituencies Big data activity/value chain


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Mobile Data Networks

Since the first commercial roll-out of 3G in 2001, the global adoption rates for modern mobile data networks has seen an excellent growth and with the introduction of LTE (3.X G) and LTE Advanced (4G), the consumption of data intensive applications will witness a major shift from fixed line, small area networks to wide area networks.

Owing to the staggering adoption rates of mobile devices and technological innovations in mobile data networks, mobile internet will surpass desktop internet in terms of total users by 2014 (Exhibit 15).

“..led by 3G+ technologies, mobile Internet will surpass desktop Internet by 2014 in terms of users”


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As shown in Exhibit 15, the growing mobile internet will cross the 1.5 billion users mark by 2013, replacing desktop internet as the primary internet connectivity channel by 2014.

0

400

800

1200

1600

2000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Mobile Internet Users

Desktop Internet Users

Source: Morgan Stanley Research, AlphaWiseSM

Exhibit 15 Global Mobile vs. Desktop Internet User Projection, 2007-2015E Internet Users in Mn


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The growth of mobile internet will go hand in hand with the mobile internet enabled device penetration. We believe that by 2020, the number of mobile internet enabled devices in use will reach 10 bn mark (Exhibit 16). This growth can mainly be attributed to better processing power, improved user interface, lower prices and expanded service offerings provided by mobile internet, application and device vendors.

Exhibit 16 Computing Growth Drivers Over Time, 1960-2020E

Source: Morgan Stanley Research


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Exhibit 17 shows the global 3G+ (WCDMA, HSPA, TD-SCDMA, 1xEV-DO, LTE and WiMax) penetration. In 2012, global 3G+ penetration crossed the sweet spot of 30% which by 2014 will reach 43% (of the total mobile internet subscribers).

Source: Morgan Stanley Research

Exhibit 17 Global 3G+ Subscribers, 2007-2014E


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Conclusion

The Future

What is now expected from these new information systems? What are the possible evolution paths that these systems may follow? That remains to be seen while a larger part of world population gets accustomed to the New IT systems. The current growth patterns indicate a healthy rise in adoption of these technologies while the traditional methods of information creation and consumption are replaced.

Based on our analysis we predict that over a period of next two to five years:

1. New IT will emerge as a strong replacement option to the traditional IT such as desktop computing, fixed line internet and on-premise infrastructure. 2. Overall costs of owning an IT system (both for individuals and businesses) will be reduced by 25 to 50 percent. 3. Cloud computing will continue to replace on-premise systems, majorly for small and medium businesses. 4. Light weight terminal devices such as smartphones, tablets and thin clients will be employed for greater use in enterprises and will eventually replace

old terminal devices such as desktops 5. Individuals will use multiple devices for separate dedicated uses such as content creation and content consumption. 6. Mobile internet will see enormous growth in number of subscribers and will replace desktop internet as the primary connectivity channel. 7. Big Data will give rise to a new class of software applications that will be used primarily by various institutions and sectors producing and consuming

large data sets esp. governments, health care and retail. New IT, equipped with large processing power, huge storage capacity and ubiquitous systems will enable the wide scale adoption of Big Data applications.

We believe that the decade of 2010 will be the decade of emergence of New IT systems. This shift will not just help improve the quality of old systems but will enable individual, SMBs and Large Enterprises in private and public domain to leverage immense potential of modern information systems. We look forward to witness this colossal upgrade of information and communication systems – rightly coined as a “Paradigm Shift”.


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