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Number: 71
Year: 2002
Author: Johann Van Reenen, Editor
Title: Digital Libraries and Virtual Workplaces. Important Initiatives for Latin America in the Information Age

I. E-business

“Globalization” means that there are fewer resources and more competitors. It also defines new rules of the game bringing new risks as well as new opportunities. We must think locally and act globally. And also, globalization is not standardization. Even though e-commerce, e-business, and e-transactions are the most attractive terms used in the new Creative Economy, the most important force of the present change is the growing power of ideas. Ideas, that is, what is inside people’s heads. In an economy based on ideas rather than physical capital, the potential for breakaway successes is far greater. That is because ideas, like germs and viruses, are infectious. It can spread to a large population overnight; the cost of copying ideas (software) is negligible. Below are two definitions of e-commerce:

World Trade Organization: as “…the production, advertising, sale, and distribution of products via telecommunication networks.” This definition focuses on the trade of tangible products as opposed to services and content.

Merrill Lynch: as electronic transactions of information exchange, expanding the definition to include services and content. But e-business uses Information and Communications Technology (ICT) to conduct business transactions among buyers, sellers, and trading partners to improve customer service, reduce cost, and increase shareholder value. Thus, e-business extends the use of ICT to include people (customers, suppliers, distributors, and job applicants) who previously did not have access to the enterprise information resources.

E-business means new business within a week, new markets overnight, new products within an hour, new services all the time. Faster, smaller, cheaper have become the mantra describing e-business themselves, not just electronic circuits. E-business bring into play an organization’s resources and partners in new an innovative ways to create clear strategic advantages. E-business goes far beyond technology to impact and engage all aspects of a business, strategy, process, organization, and technology, to extend the business beyond its own boundaries. It enables organizations to accomplish the following goals: build customer loyalty, reach new markets, create new products and services, achieve market leadership, optimize business processes, enhance human capital, harness technology, manage risk and compliance, adds new dimensions to adaptability, flexibility and customization.

Advances in ICT are felt in the rest of the economy. Many economists now attribute a productivity increase of 1% due to ICT. For the $8.5 trillion USA economy, this results in an additional $85 billion of free output each year. And this productivity increase is understated because government statistics do not adequately define and measure output in the fast growing service sector, including banking, finance, health, and education. Investment in telecommunications and computing equipment has quadrupled over the past decade, similar increases are found in spending on software, consulting, technical support, and training. The impact of ICT industry in the US GDP can be seen in the following table.

ICT Industry Share of US GDP
ICT Industry contribution to annual GDP growth

According to the International Telecommunications Union (ITU), the total trade in telecommunications equipment and services worldwide reached $1 trillion in 1998. The trade is growing 7% annually, twice the rate of the world economy. International traffic doubled between 1990 and 1996. Technological advances in fiber optic communications and increased competition are dramatically doubling bandwidth every 9 months and reducing costs by 50%. The traffic mix is changing. Mobile subscribers increased from 10 million in 1990 to 2000 million in 1998. The number of computers on the Internet grew from 1 million in early 1993 to over 50 million in 1999. The Internet Society estimates that the number of Internet users will reach 300 million by the end of 2000. That is 5% of the world population. Under pressure from users, suppliers, and a worldwide movement for deregulation, telecommunication monopolies are ending. The 1997 World Trade Organization agreement on telecommunication services calls for the liberalization of nearly al markets by the end of 2000.

Hot e-commerce companies have gained the attraction of the media, but it is in the back-office operations of invoicing, purchasing, and inventory control that the impact of intranets and Internets is most profound. Business-to-business (B2B) commerce over the Internet is projected to jump from $48 billion in 1998 to $1.5 trillion by 2003. During the same period, consumer sales will rise from $9 billion to $108 billion.

With more than a million pages added each day, the Web is now a large bulletin board. Currently the size of the Web is estimated in over 2 billion pages. To navigate this dynamic and expanding bulletin board, search engines were invented. They crawl through these sites maintaining, for every word, a list of all Web pages containing that word, so far this is not satisfactory since the results are still to large. The Web becomes an information-rich market space through which buyers and sellers interact. Such market spaces are not fixed in physical territory but are created by the confluence of standards-based networks, Web browsers, software, content and people. The physical barriers of time and distance between the provider and the customer are minimized. The elimination of physical elements (no store, no salesperson, no order book, no cash register) lays bare the essentials of a commercial transaction. E-business changes the rules of engagement. For the buyer, e-business means the cost of finding an alternative provider is minimal. For the seller, the risks of not engaging a customer’s attention and thus losing a customer are high. Thus, much of the ability to decide how business will be done has shifted from the seller to the buyer.

Telecommunication enables giant media companies to manufacture and spread worldwide mass culture, erasing local boundaries and sensibilities, also giving a new dimension to privacy. Currently, over 80% of all Web pages are in English and in Latin America and the Caribbean 80% of e-commerce transactions are in favor of the developed nations. 77% of all those transactions are books, food, and PCs. Clearly, the wealthy are benefiting from this inequality. An advantage of ICT is that isolated, like-minded individuals are forming communities to pursue their common interests and to build new cultural islands outside mass culture. People are also beginning to tune out from the media system dominated by fewer than 10 multinational conglomerates. The control of the media is becoming a political issue all over the world. The media that a truly democratic society deserves is a media that brings us a wealth of diverse opinions and entertainment options; which encourage the free flow of information in both directions, and where the average citizen can voice his/her concerns. Further in the future lies the possibility that education will become a truly lifelong process, enabling a much fuller development of our potential, and direct democracy will make the average citizen more involved and active, and leaders accountable.