Smaller, faster, cheaper computers are already reshaping industries, and hinting at what the future holds
The age of the mainframe was like the age of the dinosaur: size equaled power. In information-intensive industries, power went to the biggest players, who could afford complex information systems. But as technology advanced, huge corporations were slow to adapt. They hung on to their outdated equipment as new companies entered the marketplace on the wings of smaller, faster, cheaper computers.
Welcome to the age of high-speed networking. Processors three times faster than today's Pentiums and PowerPCs will hit the market by mid-1996. Object-oriented software, a highly flexible programming language, is becoming mainstream. Just as earlier advances pulled customers away from IBM and Digital, the next technology wave will swamp large companies' customers in key industries.
In the telephone industry, for instance, a typical regional Bell operating company spends about $2,000 per subscriber, which pays for wires, antennae, switches, and all the other stuff that makes phones work. New entrants in telecommunications will cut that investment in half by using existing cable-television wire and new, cheaper platforms comprising PCs, workstations, and parallel processors instead of the mainframes that are currently in place. A $1.5-million base station for cellular-phone service will soon cost just $100,000, and the price may drop to $10,000 before the decade's end. Those changes will do more to open up the industry than government deregulation did. And the new entrants won't be saddled with ancient, mainframe-based billing and support systems. Think of the minimills that challenged big steel in the 1980s, and you've got the prognosis.
The new technology may hit the banking and financial industries even harder. How will banks look in the age of the high-speed network? Not like today's market leaders, with their imposing downtown offices and numerous branches. They might resemble First Direct, in Great Britain, a five-year-old division of Midland Bank Plc. First Direct features a 24-hour person-to-person telephone bank that allows customers to do business either by telephone or by using any one of 7,000 automated-teller machines located throughout Great Britain. And it operates two call centers instead of hundreds of branches. The whole operation is new from the ground up. It is so cost-efficient that it offers interest rates that are more than 9% higher than its competition.
But the real fun will start with the so-called intelligent-agent software that will run on PersonLink, an AT&T network. Based on information the user provides, it will make decisions, say, to move the user's bank and credit-card balances to the institutions with the best interest rates. It will send long-distance phone calls to the cheapest carrier, and issue stock- and bond-trade orders when investments hit preset price points. All that will be real, soon to be brought to you by the likes of General Magic.
Information-intensive industries like those mentioned above are where technological change has traditionally been felt, and this time around technological advances will cause huge upheavals in the structure of basic services. They will allow small companies to offer everything the big guys do, and more. And because huge corporations move so slowly, the little guys will have a chance to nibble away at their business.
To remain competitive, remember: smaller, faster, cheaper. Ditch the mainframe. Ditch the VAX. Install the most advanced client-server systems and networks you can afford. Watch the press on the CommerceNet experiment -- a consortium of companies and organizations formed to facilitate the use of the Internet for business -- for ideas and hints. And get on the Internet. It allows newcomers to make fortunes.
Most important, each company must alter its perception of its industry and its place in that industry. If you're hiding in a tiny niche, it's time to come out and challenge the Fortune 500 behemoths on their own ground.* * *
David Mason is a cofounder of Boston-based Northeast Consulting Resources, which specializes in strategic planning and information-systems consulting.