The Future of Business 2008 - 2018

S2 Innovation Review – 2H 2008

JM — Wed, 14 Apr 2010 01:03:31 +0000

S2 Innovation Review – 2H 2008

The S2 Innovation Review is published by S2 Intelligence to help the business strategist understand recent trends and developments that matter relating to IT and business innovation. This edition covers the period from July 2008 to January 2009.

Table of contents

Introduction

1.   Cloud computing & business innovation
2.   Altium: a case study
3.   Prototyping and product development
4.   Programmable matter
5.   Smart energy & green accounting
6.   Smart parking
7.   Usage-based insurance
8.   Print on demand
9.   Airport operations
10. Retail intelligence
11. Mining customer sentiments
12. Analysing financial reports
13. Community intelligence
14. Connecting businesses in the cloud
15. Business intelligence in the cloud
16. Digital information in healthcare
17. Trusted medical information
18. Home health monitoring
19. Genomic analysis and health insurance
20. Governance and information transparency
21. Advertising management
22. The price of office productivity
23. Bring-your-own laptop
24. Desktop-to-desktop videoconferencing
25. Learning and training
26. Policy management
27. The business case for robots
28. Robot apprentices
29. Micro-sized aerial vehicles
30. Warehouse automation
31. Audio surveillance and public safety
32. A new national security challenge
33. Changes in the software development industry
34. Computer hardware

Introduction

This document is designed to help the strategist understand recent trends and developments that matter relating to IT and business innovation. It draws on interviews, onsite research and secondary sources for the period July 2008 to January 2009. It is best read in conjunction with our flagship report The Future of Business 2008-2018, How Information Technology will Transform Industry, Organisations and Work. References to predictions and analysis contained in that report have been appended with the letters FOB and the relevant section number e.g.’(FOB 1.1)’.

S2 Intelligence is a think tank. We help our clients innovate by researching digital opportunities in business and society. For more information on our reports and management consulting services go to www.s2intelligence.com.au. For sales enquiries please call 1300-66-55-20 (Australia) or +61-2-9984-7744 (Worldwide) or email info@s2intelligence.com.au.

Feedback, insights and alternative viewpoints relating to the contents of this document are warmly welcomed and can be directed to info@s2intelligence.com.au.

1. Cloud computing & business innovation

Developments in cloud computing continue to reinforce our aggressive projections for its adoption by business (FOB 6.1).

We spent two days at the San Francisco headquarters of Salesforce.com, the leader in the provision of enterprise software as an online service.[1]

Salesforce.com has expanded from being a specialist provider of customer management software to providing a general facility where any business software can be developed as an online service. They have branded this facility Force.com.[2]

For managers, this means businesses now have available a substantial capability for developing heavyweight enterprise software in the cloud. The benefits for innovation are significant:

Business can build their own software while outsourcing the management of all necessary infrastructure. Databases, hardware, security, programming languages, tools, pre-built components, as well as all the associated management of licenses and version updates, can be effectively pushed behind the scenes and forgotten.
Technology complexity is substantially reduced in the business.
Business developers can focus more effort on design, innovation and business value.
Capital investment required by small businesses to get off the ground is reduced. Software can be ‘built small’ and scaled fast to support a growing business.
Businesses can tap into the services of a large pool of software developers, on demand, that build software on the same platform.
Business can use a large pool of pre-built enterprise software components on the same platform.

All of which translates to a substantial reduction in time to market.

Time to market and business ‘agility’ are rapidly becoming dominant benefits for adoption of cloud computing. Companies taking full advantage of this approach are cutting time to market for new initiatives from years to months, and from months to days.

Salesforce.com is only one example of a platform created for businesses to build enterprise software in the cloud. Other platforms include Coghead (www.coghead.com), Rollbase (www.rollbase.com), NetSuite Business Operating System (www.netsuite.com) and LongJump (www.longjump.com). The list is growing rapidly.[3]

Salesforce.com, however, is especially significant because of its track record in delivering heavyweight applications to large, mainstream businesses. In the past five years not a single Salesforce.com customer interviewed by S2 has expressed anything other than strong positive outcomes. That outcome is unique.

This leadership is rapidly moving the goalposts for Microsoft, SAP, Oracle and every other provider of business software.[4]

A new world of software development is opening up. It is not a wholesale displacement of the old one. The development of ‘on the premises’ software is not going to disappear. ‘In the cloud’ software development will, however, be strongly associated with rapid, disruptive innovation by businesses.

2. Altium: a case study

Altium Limited (www.altium.com) is an Australian company providing electronics design solutions to blue chip customers such as 3M, BMW, Boeing, Motorola and Bosch. Altium aggressively exploits cloud computing in its business, and is a model for business innovation and agility.

S2 arranged a visit to the company to learn from its experiences.[5] Key lessons for managers were:

In-the-cloud offerings for customer management, email, storage and accounting software were all sufficiently mature for adoption by Altium.
Office productivity applications and computer processing in the cloud (Amazon EC2) were not yet sufficiently mature for adoption by Altium, but were expected to be soon.
‘In the cloud’ software development has been used aggressively across all functions of the business. Altium has successfully built applications on Force.com for purchase requisitions, quoting, HR modelling, electronic design, quality assurance, customer information and support tools, and digital learning.
‘In the cloud’ software development is delivering extraordinary time to market benefits. Many of the applications described above were built in only a few weeks.
The Force.com platform has limitations today that make it primarily a place for transactional services, rather than services involving intensive processing.[6]
Altium considers the additional network costs trivial relative to the returned benefits from cloud computing.[7]
The information security delivered by service providers is considered far superior to what Altium could build around on-the-premises alternatives.
A noted attraction of cloud software providers over traditional software companies is simplicity of licensing/pricing schemes.[8]

3. Prototyping and product development

3D printing is now widely available as an online service. Typically, such services accept design inputs from CAD systems owned and operated by businesses, but we expect them to increasingly offer CAD software as an online, rentable service as well. Ultimately, this holds the promise of removing yet another capital investment for small manufacturers.

Shapeways (www.shapeways.com) gives an indication of how sophisticated prototyping is rapidly becoming accessible to anybody that wants it. It offers online 3D design software, the ability to share and collaborate on designs, 3D object printing services, and the ability to make money from objects printed using your designs. It is cheap enough for consumers to print one-off objects for fun.[9]

Immersive environments such as Second Life are emerging as useful tools for prototyping complex business systems or processes. In September, students at the University of Arkansas used Second Life as a way to test a comprehensive simulation of Radio frequency ID (RFID) deployment in a hospital.[10] The simulation could account for complex interactions between patient services, hospital architecture, medical supplies, medical equipment and patients—with the decisions made by real people via avatars. Such simulations will become even more powerful when conducted in mirror worlds (FOB 5.6).

An excellent example of the power of prosumer approaches to product development (FOB 7.2) was spotted in the Open Prosthetics Project (http://openprosthetics.org/), which has successfully brought together users of prosthetic limbs to create and improve designs where major manufacturers cannot afford to participate (ie niche market sizes make it difficult to get a return on investment).

Another (non manufacturing) prosumer example was the creation of ‘social viewing rooms’ by CBS Television (http://www.cbs.com/socialroom/). Audiences can exchange tags and comments while watching live broadcasts of selected shows, thereby creating a new social dimension to enhance the standard television experience.

4. Programmable matter

At the end of our forecast horizon, a disruptive development in product prototyping and design is expected to be programmable matter, where quantities of smart particles can reconfigure themselves into different shapes on demand.[11]

Today, the concept seems more at home in a Michael Crichton novel, but it is likely that by 2018 managers will be able to view designs of buildings, car components or other items as physical, 3-D tabletop objects, and those objects will be able to morph into design alternatives at the click of a mouse button.[12]

The packaging of computer logic into small enough particles is no longer a barrier. Key challenges are programming methods, reconfigurable circuits and power delivery. Another application area will likely be rich 3-D modelling of medical scans prior to surgery.

5. Smart energy & green accounting

Innovative solutions in smart energy and green accounting are multiplying rapidly. We estimate that over the last year there has been a tenfold increase.[13]

Announcements of city-wide rollouts of smart meters now take place on almost a weekly basis, and considerable attention is focused on innovation around appliance controllers (FOB 8.4). An example is the Grid Friendly Appliance Controller which temporarily powers off washing machines and dryers when it detects a heavy load on the electricity grid. This was trialled in 150 US homes. [14]

We notice all sorts of companies are now incorporating carbon in their procurement criteria, making it mandatory for all types of suppliers—from airlines to packaging companies—to provide this information (FOB 16.2). While carbon is still the dominant focus, managers are beginning to think more about including other factors in sustainability accounting.[15]

We note escalating interest in energy instrumentation in buildings (FOB 8.4) in interviews with data centre facility managers, construction companies and building engineering firms. Coupled with this type of instrumentation, we note the considerable scope for innovation in new digital solutions to incorporate all types of sustainability factors in building designs, facilities management and urban planning.[16]

Exploiting more sophisticated data mining and airspace/routing software to reduce fuel burn in commercial aircraft is another interesting innovation in smart energy.[17]

Electricity usage in data centres is now a fundamental barrier to growth for information-centric businesses. IBM managers commented to us that big US data centre owners are spending more per year on energy than the total amount spent on hardware. Considerable attention is being given to locating new installations in cooler locations, which translate to reductions in energy requirements for cooling, and in locations close to power sources.

We expect these developments to flow into significant changes in the way businesses run IT. Companies are moving electricity charges, hitherto a centralised expense, onto the P & L of business units, and electricity billing will very soon become standard in internal IT chargeback schemes.

6. Smart parking

An interesting innovation in the transportation field is the installation of 6000 smart sensors in parking spaces across San Francisco. While sensors have been used in multistorey parking stations for some time, this extends the concept to a service for general street parking: any driver will soon receive in-car console/handset guidance to the nearest available space. This is an exercise in convenience, a transportation efficiency improvement, and a contribution towards energy and emissions reductions.[18]

7. Usage-based insurance

Our prediction of mass-customised auto insurance policies is running ahead of schedule (FOB 11.7). Examples of established services include mileage discounts offered by GMAC Insurance (www.gmacinsurance.com), based on data from OnStar GPS systems, and MyRate from Progressive (http://www.progressive.com/myrate/). We expect usage-based insurance to be routine before 2011.[19]

The possibility of electricity consumption data being used to customise home and contents insurance was also drawn to our attention. The CIO of a major energy company flagged as an opportunity the notion of selling this type of data, collected from smart meters, to insurance companies for this purpose.[20]

The above developments are representative of the latticework of online business analytics sources and resources that we have labelled the ‘analytics economy’ (FOB 9.6).

8. Print on demand

Our predictions for the role of print on demand in mainstream bookstores (FOB 8.2) were supported by Angus & Robertson becoming the first Australian book chain to install a machine to print, trim and bind paperback books at the point of sale. The chain announced plans to install 50 machines in a year.[21] The economics of standard high volume print runs versus print on demand will continue to shift with rising costs for global transportation and storage of book inventory.

9. Airport operations

The airline industry completed its global transition to 100% electronic ticketing (FOB 8.6) which is estimated to be 10 percent of the cost of paper ticketing. Steady progress is also being made in removing paper from freight transactions between airlines, freight forwarders, customs administrations and governments. As at the end of 2008, e-freight operations were underway in 11 countries, with a deadline of the end of 2010 for global “implementation of e-freight where feasible”. The International Air Transport Association (IATA) dropped its push for airports to globally standardise on radio tags luggage tracking, however, citing financial considerations. Airports will continue these projects individually and at their own pace. Without the mandate from IATA, our predicted timetable for the transition (FOB 8.5) has now been adjusted to 2013.[22]

10. Retail intelligence

A new retail innovation offers an interesting approach to resolving the business and technical challenges of using RFID tags to get item-level intelligence in supermarkets (FOB 8.5; p-144).

ShoppingTrip360, an offering from Infosys, replaces RFID tags with a network of wireless sensors placed on supermarket shelves. The sensors are capable of tracking stock on hand, shopper concentrations, when items are picked up and more. [23]

Most interestingly, ShoppingTrip360 is installed at no charge, with retailers asked to pay only for the information services they use. This re-invents the business case for item level intelligence in retail. It also potentially places Infosys at the centre of a retail information hub that will grow in value as it aggregates data feeds from many customers (FOB 9.5).

11. Mining customer sentiments

Sentiment mining is beginning to become more routine, in line with our predictions (FOB 9.3).

S2 was made aware of several hotel chains, and several fast moving consumer goods companies, that are routinely machine-analysing large volumes of unstructured customer comments.

Data sources include feedback forms received via websites, recorded audio in contact centres, blogs, newsfeeds and other sites containing text-based comments from customers.

Also brought to our attention was the mining of customer comments to identify common problems, and to zero in the models, production runs or office locations associated with faults.

S2 received an impressive demonstration of cutting edge sentiment analysis being incorporated into IBM’s Business Insights Workbench product. The capabilities were being piloted in the field by a small number of corporate customers for monitoring and measuring public sentiments relating to their individual brands. [24]

12. Analysing financial reports

Managers at leading analytics company Cognos (www.cognos.com) drew our attention to the business analysis opportunities associated with the introduction of the XBRL standards for business reporting.[25]

Large scale XBRL adoption is already underway in many countries. The primary objective is giving a consistent structure to financial reporting information to improve its interchange between corporations, banks, investment companies, accounting firms and government regulators (See FOB p-178).

XBRL will also effectively create a vast public resource for business intelligence systems to mine. It will make it easy, for example, for machines to perform like-for-like comparative financial analysis across multiple companies, geographies and reporting periods.

13. Community intelligence

Businesses will steadily extend the notion of exploiting ‘the wisdom of crowds’ to take advantage of the electronic sensors carried around by people every day. Examples include cameras, accelerometers, GPS systems and microphones imbedded in handsets, laptops and motor vehicles, but ultimately the range of possible sensors is unlimited. In line with expectations, spatial information collected from GPS systems in handsets and vehicles is a frequent target (FOB 11.7).

An indication of the possibilities is given by the Quake Capture Network (www.qcnstanford.edu) which uses on-board accelerometers in laptops (standard sensors that help minimise damage to laptops when dropped) as a means to detect and pinpoint seismic activity. Any Internet connected laptop can participate and, as at September 2008, the project was collating data from the laptops of 1,500 volunteers. In the national security domain, others are exploring how the vast number of handsets in use can be exploited for early detection of any radioactive material carried into urban environments.

14. Connecting businesses in the cloud

Cloud computing is making it vastly easier to connect business processes between trading partners. S2 saw a demonstration of Salesforce.com tools that map fields and records between trading partners in the same supply chain, and met with a developer, Appirio (www.appirio.com), pursuing this type of work.

It is understood that Dell and Motorola are among the companies encouraging trading partners to move to the same shared platform, and then connecting customer record and transaction flows across their supply chains.

This approach also has potential is in integrating health records across many health service providers (see Section 16).

15. Business intelligence in the cloud

Having multiple trading partners running their software on one shared platform ‘in the cloud’, as described above, makes it relatively straightforward to share business intelligence across all members of a supply chain. Furthermore, this intelligence can readily be provided in real-time (i.e. as soon as sales patterns are visible to one trading partner they are visible to all trading partners).

We note that two providers of business analytics solutions ‘in the cloud’ that are working closely with Salesforce.com to capitalise on this opportunity are Cloud 9 Analytics (www.cloud9analytics.com) and LucidEra (www.lucidera.com).

We had the opportunity to test our expected proliferation of online, on-demand analytics services (FOB 9.6) with executives at Cognos, who confirmed that the company expects more of its capabilities to be provided as online services over time.

We continue to note transferring data over networks as a bottleneck, however, if large quantities of business data are collected in multiple locations. Common examples are when conversations are recorded and stored in multiple call centres, and video surveillance is archived in many retail stores. In these circumstances, we expect distributed models of business analytics—with some analysis ‘on location’ and some combined analysis—to be an important area of innovation.

16. Digital information in healthcare

S2 continued its investigations into the future of healthcare by meeting with leading thinkers in this field.[26]

On the subject of e-health records (EHRs), we note the following additional insights on adoption challenges for medical practitioners: [27]

They are a particularly time-constrained group of professionals, with little discretionary time for exploring and learning new routines.
Their routines are especially entrenched, having been institutionalised, largely on the basis of optimising medical outcomes, over hundreds of years.
They learn routines through master/apprenticeship relationships via internships, which naturally tend to reinforce old practices over new ones.
High turnover of nurses and hospital staff is a critical issue in many healthcare systems.
The challenges are greatest in the ‘cottage industry’ of small practices, rather than in hospitals. In the United States the vast majority of medical practices are small businesses with less than 10 doctors, and something like 85% of medical practitioners still work with paper based files for medical records.

These factors must be understood in detail for any EHR initiative to successfully change practitioner routines. It is especially critical, for example, to simplify existing procedures, rather than add new ones into the already crowded workday. Adapting, rather than replacing, existing practices is important (eg by accommodating the modes of data input—voice, text, pen—preferred by different doctors). It is vital that systems that can be learned quickly, with minimal formal training, by hospital staff. [28]

On public and private sponsored EHR initiatives we make the following additional observations:

Government sponsored EHR initiatives continue to make the mistake of attempting to design an ideal solution from the outset. This is an impossible task: changing complex, established health systems demands an incremental, evolutionary approach.
EHR leaders cited in interviews included Canada, the state of Massachusetts, Kaiser Permanente, Cleveland Health, and the City of Indianapolis.
In the case of Canada, key factors in their success were named as a very considerable program to educate practitioners, and tying EHR adoption directly to the ability for practitioners to get rebates.
Cleveland Clinic is an outstanding example of a Health provider pushing the boundaries for digital information sharing between patients and practitioners. Its web based services include practice management and EHR management for doctors, personal health management for patients, an integrated appointment system, services for forwarding records for second opinions, remote health monitoring services, and services to facilitate access to remote specialists. Google health is also used for sharing records between providers.[29]
EHR systems are sometimes categorised as ‘practitioner facing’ or ‘patient facing’, depending on who has the access and control of the information, but we expect that self management of medical records will become mandatory for citizens in Western democracies.
Combining health records across data formats, proprietary systems and political boundaries is fundamental to disease tracking and public health surveillance. Many countries are still collecting these data on spreadsheets, making creative approaches to collection and collation very important.[30]
Google is not allowing data mining of records it holds. This makes it a poor platform for governments, which should aim to return substantial value to the community via health analytics.
We expect Google Health to complement, rather than displace, other EHR systems. Google sees a significant opportunity in fostering a community of third party developers to build applications around the edges of Google Health, as it has done so successfully with other products.[31]

For medical practitioners, considerable social challenges also apply to the broader accessibility of digital health information:

As a general principle, practitioners can expect patients to progressively get access to 100% of the information resources available to doctors.
Practitioners are moving from a situation where their work is essentially private, to one in which their notes, opinions and diagnoses will be shared and read by colleagues as per their patient’s wishes. Essentially they are moving into an environment of aggressive ‘peer review’, similar to the one in which publishing scientists operate.
Internet educated patients are often considered annoying. The notion, then, of decision support tools openly validating or dissenting from a diagnosis, during a consultation, is extremely challenging. Nevertheless, we expect such digital assistance to become routine.
Expertise is based on more than access to knowledge but (as with many professions) digital information access will greatly diminish the status of doctors as experts.

Many of these social challenges will only disappear as a new generation of doctors moves through the system.

Ehealth represents one component in making health systems more cost-efficient. It is, nonetheless, an important component. The management and treatment of patients with chronic diseases, which accounts for the vast majority of national health expenditure, has been repeatedly pointed out to S2 as the biggest opportunity for digital information to make a difference.

Unfortunately, most policy makers cannot see ehealth through the lens of leveraging information to make money go further in the health sector. They persist in seeing only the costs associated with the installation of technology. It was encouraging, however, to see digital information explicitly described as a cost saving mechanism in the health policies of the incoming US president.

17. Trusted medical information

Two interesting developments relate to the opportunities to innovate around the role of trust in medical information.

The Medpedia Project (www.medpedia.com) is attempting to displace many unvalidated sources of online medical information with a single, comprehensive and authoritative online encyclopaedia. It aims to build trust by harnessing communities of leading medical professionals to ensure quality control and integrity in the content. It is due to launch in early 2009.

There appears to be a trend towards community-based information resources, especially regarding treatments and outcomes for chronic conditions. An example is the community being fostered on WebMD.[32] People assign a high level of trustworthiness to information from others suffering from the same medical conditions, often far more than advice received from doctors. Communities that manage to foster both online and face-to-face connections are likely to have a particularly high value.

18. Home health monitoring

Home health monitoring services are maturing quickly. We note that specialist monitoring systems are likely to be displaced by sensors that work with standard handsets. See, for example, the two options offered by Zume Life (http://www.zumelife.com/). We also expect monitoring services to be more successful when owned and managed by specialist intermediary providers rather than by hospitals.

19. Genomic analysis and health insurance

Genomic analysis continues to threaten equality of access to healthcare and insurance cover. During 2008, governments have been active in broadening non-discrimination acts to mitigate against this. In the long term, however, we believe regulatory mechanisms will be ineffective, and genomic information, along with all other types of health data, will find its way to insurers regardless (see FOB 11.7).

The corollary to this is that a long-term outcome of transparency in health information is, inevitably, the nationalisation of health insurance.

20. Governance and information transparency

The City of Atlanta has been brought to our attention as a strong example of the trend towards transparency in governance (FOB 15.1), having made the key metrics on the city’s performance management dashboard freely available online.[33]

The ‘Hospital Compare’ tool from the US Department of Health & Human Services (www.hospitalcompare.hhs.gov) is worth browsing as an example of the power of collective intelligence regarding quality of service in healthcare. It is highly suggestive of our predictions for how information transparency will transform public engagement in health policy and for how medical professionals will be measured and compensated in future (FOB 9.5, 14.2).

The automatic recording, indexing and retrieval of everything said publicly by a company representative (FOB 15.1) became closer to reality when, in September, Google launched its own service to index speech in audio and video clips. Gaudi (http://labs.google.com/gaudi) compliments a number of existing services (FOB p-129), and has begun by indexing all online clips containing political content.

Our timetable for the indexing of identities of people in all online photographs has been supported by Google’s launch of automatic face recognition services on the Picassa (http://picassa.google.com/ photo hosting platform. Google has taken the powerful idea of combining human and machine face-recognition (FOB p-129) and added another dimension by allowing people to share the resulting labels. Within 2 years we expect handsets to automatically tag photographs, as they are taken, with the names of people appearing in them.

21. Advertising management

The automated management of business advertising (FOB 10.2) took a step further with moves by US cable television companies to add a common advertising broking layer so advertisers can buy targeted advertising across all 6 networks.[34] This complements earlier moves by US newspaper companies to form a common broking layer (FOB p-152).

22. The price of office productivity

The price of office productivity is about to fall further. Business buyers can expect the cost of providing Microsoft Office to employees to fall below USD10 per user, per year, by 2013.

This is a big reduction compared to current and historic average license fees. It will be driven by the shift to renting office productivity suites as an outsourced service by all suppliers, head-on competition from other providers, especially Google (with business takeup expected to accelerate rapidly from 2010) and the gradual adoption of pricing models supported by advertising and pay-per-use add-on services. Our forecasted take-up of online office productivity suites by 2013 and 2016 remains unchanged (FOB 6.1, 6.3).

These developments signal the transition of office productivity software to a true background utility.

23. Bring-your-own laptop

Citrix announced that it is now giving its workers an allowance to buy their own laptops, while the company maintains work applications and data on centralised, remotely accessed computing facilities. The announcement is self serving for Citrix, given that it sells the technologies to support this practice, but it is nonetheless an early example of our predicted shift to ‘bring-your-own laptop’ schemes by large businesses (FOB 12.2).

Also on the mobile work front, there appear to be substantial opportunities opening up to support nomadic work practices, including the provision of nomadic workspaces and drop-in centres by both governments and private companies.[35] The introduction by Google of voice based searches from iPhones represents a step towards universal natural language accessibility for the mobile worker (FOB p-41).

24. Desktop-to-desktop videoconferencing

In a recent project, S2 conducted interviews across organisations that had installed ‘unified communications’ for their employees, including multipoint desktop-to-desktop videoconferencing. Findings included:

Top justifications for desktop-to-desktop videoconferencing, in order of importance, were reduced travel (and reduced carbon footprint), productivity of remote workers / distributed teams, improving the quality of decision making.
Actual employee take-up of desktop-to-desktop videoconferencing varied considerably.

High adoption coincided with organisations with highly dispersed teams and where significant investments in network infrastructure were made before implementing. Such organisations reported a strong returned benefit.

Worker adoption stalled, on the other hand, with even occasional issues with the quality of transmission. It was vital to invest in infrastructure to the point that a high quality experience could always be guaranteed.

In some organisations, employees asking for desktop-to-desktop videoconferencing hardly used it when they got it. Respondents reported that what appeared to be a ’need to have’ was often only a ‘nice to have’ for different work groups.
Putting videoconferencing into meeting rooms rather than on desktops is likely to offer a better outcome in many organisations, with more certain costs, utilisation rates and payback.
Workers universally valued the basic, low-cost technology of presence detection. The ability to detect whether a colleague is at their desk or not made a significant contribution to productivity by reducing time chasing down colleagues when synchronous communication was required.

25. Learning and training

Some new examples of augmented reality used in the learning domain include technology from Media Power, which mixes media by triggering short videos when books are viewed though a handset camera, and the virtual welder trainer offered by CS-Wave, which saves considerable time, and steel, when teaching trainees to weld, an activity that is as much art as science.[36]

The value of virtual and mirror worlds for language training was brought to our attention. Contextualising audio lessons with objects, places and people that are interactive, thus engaging the student more completely, promises to vastly improve learning and retention rates. We expect these to become a routine part of language training by 2011.

26. Policy management

S2 saw an impressive demonstration of software to automate the management of, and enforce compliance with, company policies (or legislation, regulator requirements, etc). The software was from Haley (www.haley.com) a company since acquired by Oracle.

This technology allows managers to maintain complex company policy rules in standard Microsoft Word documents, and then uses these plain-English sources to automatically build interactive, web-based dialogs that employees, or customers, can use as a way to verify compliance.

One application is approval policies for social security payments.[37] The software scans documents containing complex social security rules to automatically generate a dynamic, web-based question and answer session. This is then accessed by call centre staff (or directly by citizens, via the social security website) to determine eligibility on a case by case basis.

Most impressively, the software enables a lifecycle approach for managing and improving policies. It is possible, for example, to run ‘what if’ scenarios on proposed rule changes to see how all previous cases would have been handled had these rules applied.

We understand that currently 70% of organisations using this software are in the public sector, but see countless applications in the private sector. In the near term we expect rapid take-up by businesses to improve health and safety compliance, credit checking, insurance and loans eligibility, financial regulation compliance, and compliance with environmental corporate social responsibility (CSR) policies.

27. The business case for robots

The past six months have reinforced the very slow projected deployment of robots in new commercial domains. While the pace of innovation is accelerating, time and again the business case for robots, when compared to human labour, is described to S2 as uncompelling.

The case of mining serves to illustrate. Relative to other commercial environments, mine sites are highly favourable to the robot deployment (FOB 8.1). The working environment is dangerous, flying workers to and from remote locations is expensive, work is process driven, the terrain, relative to other environments, is easy for robots to navigate, and optimising the use of expensive assets is critical (eg maximum utilisation of heavy haulage vehicles). For these reasons, a relatively wide range of roboticised equipment has been produced for mining. Despite all this, an Australian mining executive interviewed by S2 noted that in almost all mine site roles human labour remains the cheapest and most flexible alternative, and that remotely controlled equipment provides most of the same advantages as robots at far less cost.

The biggest promise for improving returns on investment for robots is creating effective general purpose, or multi-role robots. More role capabilities translate to fewer robots with greater utilisation. Unfortunately, we have seen nothing to change our position that general purpose robots will play no significant role in industry within the forecast horizon (FOB 5.10). In August, we saw a demonstration, by Intel and Carnegie Mellon, of the cutting edge in robot fetching and manipulation of household objects. These capabilities remain severely limited in terms of practical usefulness.

An especially big gap between fantasy and reality persists in anthropomorphic robots (FOB 5.10). It is noteworthy that the world’s leading roboticists consistently make bigger headlines for theories on the social and ethical issues in this field, than they do for actually producing robots. In 2008, for example, considerable international attention was given to ideas put forward that we will one day marry robots,[38] a concept where the reality falls impossibly short of the rhetoric. Realistically, we can expect adult toy manufacturers like RealDoll[39] to add animatronics to their products, and limited roboticised substitution for human services in the sex industry, within the forecast horizon. A robot that people will be pleased to substitute for a life partner, however, is not on any horizon at all.

28. Robot apprentices

In August, our attention was drawn to ‘apprenticeship learning’ as a practical way to improve the robot business case, by making it easier to prepare robots for new tasks. Researchers at Stanford University successfully created roboticised helicopters capable of learning, emulating, and (most significantly) improving upon complex aerobatic routines performed by human controllers.[40]

It appears likely, for example, that robot mining vehicles could learn layouts, and even operating procedures, for specific mine sites by following around manned equipment for a period of time. This might translate to a significant reduction in the time and cost of automating mine sites.

If apprenticeship learning can be combined across many Internet-connected robots simultaneously it could produce training outcomes that are exponentially faster again.

29. Micro-sized aerial vehicles

Micro-sized aerial vehicles (MAVs) offer interesting new innovative possibilities towards the end of our forecast horizon.

The DelFly Micro prototype at Delft University of Technology provided an indicator for the current status of MAVs. The DelFly had a 10cm wingspan, weighed 3g and was capable of carrying a 4g camera. Flight was remote controlled, with plans to make it autonomous. An even smaller MAV was constructed by the Harvard Microrobotics Laboratory weighing 60mg and with a 3cm wingspan. The Microrobotic Fly used flapping-wings to make its first flight in late 2007, albeit without a camera payload.[41]

Projected trends in processing power, cost and packaging mean computer processing hardware, and digital cameras, will soon disappear as significant payload factors in MAVs, allowing more freedom to extend their capabilities in other ways.

A video released by the US Air Force Research Laboratory showed that future military intentions have moved beyond the use of MAVs for surveillance and now include armed intervention (by carrying, for example, gas or explosive payloads). The Air Force proposes that MAVs will be airdropped over urban areas, deployed in numbers rather than singly, and will be capable of sitting for long periods in a low-power ‘dormant’ mode of operation before being activated.[42] These are representative of capabilities that will eventually trickle down into industrial applications.

As MAVs mature we can anticipate their deployment, towards the end of the forecast period, in search and rescue, environmental monitoring and remote asset inspection roles.

30. Warehouse automation

A visit was made to Australian Pharmaceutical Industries (www.api.net.au) warehouse facility in Western Sydney. This is among of the largest in the country, supplying stock to 3,500 pharmacies on a daily basis. Considerable work has been undertaken to make its operations efficient.

API’s setup for assisted picking was particularly interesting. Warehouse personnel received their instructions via computer generated speech sent to their wireless headsets. They confirmed an item had been picked by stating its 2-digit confirmation code into their microphone. A high degree of accuracy was achieved through this simple procedure, and by having the system continuously refine the voice profile of every worker.

Complementing this was a fully automated “A-frame” with racks for dispensing pharmaceuticals that were frequently ordered, and packaged in regular ‘box’ shapes.

Robot pickers were not considered viable because they could be offer no productivity improvement over the A-frame dispenser, and people were far better suited to handling the disparity in packaging shapes/sizes in other product lines. RFID tags were not adopted, despite having much to offer an industry where date stamping, product returns, and the tracking of dangerous/addictive substances are important. Primary reasons were high costs for non-recoverable tags and the need for simultaneous adoption across manufacturers supplying API before substantial benefit could be realised.[43]

31. Audio surveillance and public safety

The city of Newark, New Jersey, has extended beyond the ubiquitous surveillance camera into other types of digital sensors for urban crime detection. Newark’s cameras (equipped with night vision and long range zoom capabilities) have now been deployed in combination with a network of audio sensors. The audio sensors allow automatic triangulation on gunshots. Police officers are then provided with immediate, precise location information when alerts are generated, so they can arrive on the scene faster. Sensor coverage is focused on problem zones within the city.[44] The deployment is yet another example of advanced military technologies (in this case acoustic sensors to locate snipers) trickling down into broader applications.

32. A new national security challenge

We have previously pointed out how cloud computing will translate into an exponential increase in outsourced arrangements, and new business dependencies, for large organisations (FOB 6.1, 6.3).

For countries outside the United States we further note that cloud computing is translating into a national security issue, due to the strong US-centricity of the key service providers.

All types of government and public infrastructure organisations stand to benefit operationally from exploiting cloud computing. In July, for example, the Chief Information officer of the US Defense Information Systems Agency (DISA) made public his conclusion that cloud computing was ‘the future of military data processing’, and the agency’s intention to collaborate with Amazon, Google and other providers to build additional organisational agility for US defense forces.[45]

Outside the US, however, options are much more limited. Government agencies do not wish to outsource processes to, or place government data on, servers in another country.[46] The choices can be summarised as:

Accept greater dependence on US service providers, and reduce exposure as far as possible (not much) through security guarantees, encryption and compartmentalisation of information, or
Persist with stand-alone software, which means forgoing the very significant advantages of commercial cloud computing services and, as cloud computing matures, running government & infrastructure on obsolete software, or
Develop a cutting edge domestic cloud computing capability. This is a daunting challenge in its own right, with little chance of matching the innovation of the big US service providers.

The bottom line is that, for governments and national infrastructure providers today, exploiting the advantages of cloud computing translates directly to an increased dependency on, and exposures within, the United States.

33. Changes in the software development industry

As the ‘development-in-the-cloud’ model matures (Section 1), the advantages also translate to the companies in the business of building enterprise software:

They have the option of a working environment where they no longer have to buy and install their own tools, programming languages or computer servers. Technology costs and complexity are reduced.
They can focus more effort on design, innovation and producing business value for clients.
They can access as much computer capacity as they need, when they need it. Developers can start small businesses and scale fast.
It is easy to collaborate with a large pool of colleagues around the world, which means it is also easier to specialise in niche areas.
Platforms like Force.com provide a pre-built channel to reach a large pool of global customers.
Developing in the cloud facilitates a move to continuous revenue streams from renting access to software and business process outsourcing.[47]
Lastly, providers of software as online services have a powerful innovation advantage in having complete visibility on how every person in every customer organisation uses their software. The provider can see immediately if a new feature is accepted or rejected—and can react immediately. This may be compared to a key advantage held by Dell over other PC manufacturers in the 1990’s: by selling direct, Dell always enjoyed the most complete, most up to the minute insights on what customers wanted.[48]

All these advantages are desirable as the software industry itself follows a path towards fast prototyping and rapid innovation (see FOB 3.1).

These trends signal the beginning of a sea change in the software industry, and a new battle for the ‘hearts and minds’ of software developers. Developers will be increasingly forced to make a choice as to whether they want to focus on-the-premises or in-the-cloud development of enterprise software. We expect this split to be pronounced by 2011.

Developers with a strong focus on producing innovative business outcomes (as opposed to technical innovations) are expected to gravitate to the latter group.

34. Computer hardware

S2 visited IBM and Intel labs for updates on the pace and direction of computer hardware developments, leading to the following insights relevant to business managers:[49]

Our timeline for processing power and cost is unchanged (FOB 1.1). Both companies are working on microprocessors 3-4 generations (6-8 years) beyond today’s technology. Quantum effects and other problems loom large in the second half of our forecast horizon, but the effort going into parallel processing developments will likely keep the performance/cost curve aggressive.[50]
The developments above mean substantial changes to computer architectures will arrive within the forecast horizon. They represent challenging new territory for programmers working on operating systems and computing-intensive applications. The majority of software development work inside large businesses, however, will be unaffected by these changes.
We see an acceleration in our timetable for the transition to solid state storage (FOB 1.2). Solid state storage is rapidly expanding its footprint in all types of computer hardware. Energy imperatives are driving this as much as performance.
At both IBM and Intel, S2 noted that R & D managers were focused on reducing power consumption in next generation hardware at least as much as on increasing performance.

Copyright

The entire contents of this document are copyright S2 Intelligence Pty Ltd. Reproduction or distribution to non-license holders is prohibited. Additional copies can be ordered at www.s2intelligence.com.au.

Disclaimers

The information contained in this document has been obtained from sources believed to be reliable. S2 Intelligence does not guarantee the accuracy, completeness or adequacy of such information, and shall have no liability for errors, omissions or inadequacies. The recipient assumes sole responsibility for the interpretation and use of this material for its intended results.

Predictions and forward-looking statements in this document reflect current expectations concerning future events and are subject to risks and uncertainties, many of which are beyond the control of S2 Intelligence. S2 Intelligence undertakes no obligations to update these statements as a result of new information. Opinions expressed in this document are subject to change without notice.

Contact S2 Intelligence

S2 Intelligence is a think tank. We help our clients innovate by researching digital opportunities in business and society. For more information email info@s2intelligence.com.au. Feedback, insights and alternative viewpoints relating to the contents of this document are warmly welcomed and can be directed to info@s2intelligence.com.au.

References and further reading

[1] Our thanks go to the Salesforce.com managers at their San Francisco offices for their generosity and openness in briefing us on developments. Salesforce.com also assisted with some of the travel costs for this visit.

[2] See http://www.salesforce.com/platform/ for more information on the Force.com development platform. The range of public applications now accessible from Salesforce.com platform is seen at http://www.salesforce.com/appexchange/.

[3] In addition to providers of software development platforms, we note a growing number of providers of other specialist services (such as hosting, testing, reliability and resilience services) to assist in developing and running software ‘in the cloud’.

[4] Microsoft, for example, has traditionally bolstered its market position by nurturing a large, loyal community of software developers. A shift to a whole new way of developing software has the potential to eliminate that advantage. In October it responded to this shift by launching its own platform for developers to build software in the cloud, named the Azure Services Platform (http://www.microsoft.com/azure/).

[5] We wish to acknowledge especially the generosity of Alan Perkins, Altium’s Chief Information Officer, for making an entire morning available to share his experiences and exchange ideas on the future of cloud computing.

[6] This relates to restrictions placed on the amount of code that can be executed and the size of database queries that can be made. No doubt these have been put in place to prevent maverick code from compromising quality of service on a platform shared by many customers. Developing a trust/certification infrastructure to ensure integrity of code developed by customers will help. The ultimate solution will come with procedures for sharing computer processing load more broadly across the Internet. A variety of research programs are currently exploring this.

[7] In S2 interviews, respondents not yet accessing enterprise software as an online service continue to cite increased bandwidth costs as one of their concerns.

[8] This is a non trivial issue for software companies. A recurring theme in S2 interviews is that traditional enterprise software companies continue to push complex licensing schemes that are difficult to compare, difficult to manage, and ultimately a big turn off for their customers.

[9] At the time of writing, the online design software at Shapeways, accessible at http://www.shapeways.com/creator, allowed customisation of only a few, pre-existing designs. More complex designs were created and sent in from customer-owned software. Nevertheless, this serves as a powerful demonstration of the direction of prototyping services.

[10] Details of the project can be found at the University of Arkansas Computer Science & Computer Engineering website http://vw.ddns.uark.edu/index.php?page=overview.

[11] Also known as ‘programmable morphology’, but programmable matter is a clearer term.

[12] When queried on the anticipated rate of progress, Justin Ratner, Chief Technology Officer at Intel, commented to us that “two years ago programmable matter looked like a 40 year problem, but it now looks like a 10 year problem” and flagged basic 3-D prototyping as a realistically possibility in the “7 to 10 year timeframe”.

[13] Two examples of new solution providers that received another round of venture funding recently are Clear Standards (www.clearstandards.com) and CarbonFlow (www.carbonflow.com).

[14] For more information see the Pacific Northwest National Laboratory website http://availabletechnologies.pnl.gov/technology.asp?id=61.

[15] We expect water footprinting in particular to rise in prominence. For further reading on water footprinting products and services, see www.waterfootprint.org and Gerbens-Leenes, PW and Hoekstra, AY 2008, “Business water footprint accounting: A tool to assess how production of goods and services impacts on freshwater resources worldwide”, UNESCO-IHE Institute for Water Education, Delft, the Netherlands, Available at http://www.waterfootprint.org/Reports/Report27-BusinessWaterFootprint.pdf.

[16] For further reading on the challenge of meshing construction rules and sustainability imperatives see www.architecture2030.com. An example of a supplier of this type of energy instrumentation in buildings is Gridlogix (www.gridlogix.com).

[17] See, for example, Jenkins, C, Rene LeMai, R and Woodhead, B 2008, ‘Squeezing value from every drop’, Australian Financial Review, June 17, p-33.

[18] The technology is from Streetline (www.streetlinenetworks.com). See also Markoff, J 2008, ‘Can’t Find a Parking Spot? Check Smartphone’, The New York Times, July 12, available at http://www.nytimes.com/2008/07/12/business/12newpark.html.

[19] See also the following article for an interesting discussion of the potential of usage based payments to drive ‘greener’ behaviour in transportation use: Dubner, SJ and Levitt, SD 2008, ‘Not-So-Free Ride’, The New York Times, April 20, http://www.nytimes.com/2008/04/20/magazine/20wwln-freakonomics-t.html?_r=4&oref=slogin&oref=slogin&oref=slogin.

[20] Crawford, M., 2008, ‘Knowledge is power in electricity use’, Australia Financial Review, September 2.

[21] See Moses, A 2008, ‘Print on demand with ATM for books’, Sydney Morning Herald, September 18, http://www.smh.com.au/news/technology/print-on-demand-with-atm-for-books/2008/09/18/1221331003780.html. The technology used was the Espresso Book Machine from On Demand Books – see www.ondemandbooks.com.

[22] Further information on the IATA e-ticketing, e-freight and RFID baggage tracking projects can be found at http://www.iata.org/stbsupportportal/e-ticketing.htm, http://www.iata.org/stbsupportportal/efreight/ and http://www.iata.org/stbsupportportal/rfid.htm respectively.

[23] See http://www.infosys.com/shoppingtrip360/ for more information on this offering.

[24] Our thanks go to IBM for hosting S2 at its Almaden laboratories and providing insights on the cutting edge of business analytics. See http://www.almaden.ibm.com/asr/projects/biw/ for the latest developments on Business Insights Workbench. Jeffrey Kreulen, who gave the demonstration, and his colleague Scott Spangler, have written extensively about deriving business value from unstructured information. See www.miningthetalk.com.

[25] Our thanks go to Cognos management for hosting S2 at its Ottawa headquarters. They went to great lengths to facilitate access to their best people, and many of the business analytics insights in this paper came from these meetings. Cognos also assisted with some of the travel costs for this visit.

[26] We wish to thank especially the following people who generously gave time for meetings: Sarah Knoop, Healthcare Systems Research Manager at IBM’s Almaden labs; Dr George Margelis, Intel Digital Health Group; Alex Go, Intel’s Digital Health Group; Prof Bruce Barraclough, Chair of the Board of the NSW Clinical Excellence Commission and eHealth Medical Director at CSIRO; and Vani Henderson, International Product Manager for Google Health.

[27] For previous analysis on EHRs see FOB 11.8 and S2 Innovation Review 1H08, p-10.

[28] These findings tally precisely with our previous research into adoption of electronic business practices. See McCabe, B 2006, ‘Engaging Trading Partners in E-Business’, Department of Communications IT and the Arts, Canberra, http://www.dbcde.gov.au/__data/assets/pdf_file/0009/40230/Engaging_trading_partners_in_e-business.pdf.

[29] Each of these services is accessed from the Cleveland Clinic Secure Online Services website at http://my.clevelandclinic.org/eclevelandclinic/default.aspx.

[30] An observation shared with us by IBM researchers working on the Public Health Information Affinity Domain (PHIAD). See http://services.alphaworks.ibm.com/phiad and http://www.eclipse.org/ohf/components/stem/.

[31] Basic examples include handset alerts when medication needs to be taken, services to analyse the combination of health monitoring data and health records, services to measure progress in diets and exercise plans.

[32] See http://www.webmd.com/community/default.htm.

[33] See The Atlanta Dashboard http://apps.atlantaga.gov/homepage/dashboard2.htm.

[34] The ‘Project Canoe’ initiative was reported in Arango, T., 2008 ‘Cable Firms Join Forces to Attract Focused Ads’, The New York Times, March 10, http://www.nytimes.com/2008/03/10/business/media/10cable.html.

[35] See Kluth, A 2008, ‘Nomads at last’, The Economist, April 12, pp 3-5 for an excellent discussion of the variety of new ideas and initiatives in this area.

[36] See Ashley, S 2008, ‘Annotating the real world’, Scientific American, October, p-15, and also CS Wave’s Virtual Welding Trainer at http://wave.c-s.fr/.

[37] Australia’s social security agency, Centrelink (www.centrelink.gov.au), is a key reference site for this software.

[38] See Levy, D., 2007, ‘Love and sex with robots, The Evolution of Human-Robot Relationships’, HarperCollins Publishers Inc, New York, and also Choi, C 2008, ‘Humans Marrying Robots? A Q&A with David Levy’, Scientific American, February 19, http://www.sciam.com/article.cfm?id=humans-marrying-robots.

[39] The RealDoll company (www.realdoll.com) received considerable public exposure over the past year through the Hollywood movie Lars and the Real Girl (2007).

[40] See Stanford University Autonomous Helicopter project http://heli.stanford.edu/.

[41] See www.delfly.nl and http://micro.seas.harvard.edu/research.html for more information on the Delft and Harvard projects respectively.

[42] Video released by the Air Force Research Laboratory and published via Wired Magazine and other online channels. See Shachtman, N 2008, ‘Video: Air Force’s Killer Bugbots Attack’, Wired Magazine, December 12, http://blog.wired.com/defense/2008/12/video-air-force.html.

[43] Our thanks to Doug Hall, CIO for Australian Pharmaceutical Industries, for generously making time to guide us through the entire facility, and also to Lawson Software (www.lawson.com) for kindly organising the visit.

[44] See Ante, S 2008, ‘Newark and the Future of Crime Fighting’, BusinessWeek, August 25, http://www.businessweek.com/technology/content/aug2008/tc20080822_240216.htm.

[45] Thibodeau, P 2008, ‘Pentagon’s IT unit seeks to borrow tech ideas from Google, Amazon, other companies’, Computerworld, July 17, http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9110297.

[46] Unacceptable even in countries strongly allied to the United States, such as Australia and the UK.

[47] Apttus, for example, provides proposal and contract management services by exploiting the Salesforce.com platform. See www.apttus.com.

[48] See Dell, M 1999, Direct from Dell, HarperCollins Publishers Inc, New York, pp 21-23.

[49] Our thanks go to Intel and IBM for hosting S2 at their respective facilities in California, and providing exceptional access to scientists and R & D management. Justin Rattner, Intel’s Chief Technology Officer, and Spike Narayan, IBM’s Manager of Science & Technology, were among the distinguished people that gave up their time. Intel also assisted with some of the travel costs for this visit.

[50] By way of example, S2 was given a demonstration of a prototype microprocessor that contained 80 separate computing cores and was capable of 1 trillion floating point operations per second. For further information see http://techresearch.intel.com/articles/Tera-Scale/1449.htm. We can expect to see this level of parallelism become routine in production microprocessors within the forecast horizon.

S2 Innovation Review – 1H 2008

JM — Wed, 14 Apr 2010 00:36:26 +0000

S2 Innovation Review – 1H 2008

Table of contents

Introduction

1.   Automating green accounting
2.   Projected costs for green accounting
3.   Roles for IT in sustainable business
4.   Handsets and business innovation
5.   Organisational take-up of cloud computing
6.   Office productivity services
7.   Business and a non-neutral Internet
8.   Unlocking customer ecosystems
9.   Community programming
10. Managing professional profiles
11. Worker mobility
12. Workplace collaboration and telepresence
13. Lie detection in the field
14. Advertising targeting and relevance
15. In-store servicing, intelligence and advertising
16. Changing roles in advertising agencies
17. Customer service and biometrics
18. Banks as shared service providers
19. Diminishing value in insurance broking
20. Electronic movie distribution
21. Video analysis, security and policing
22. Health records
23. Health insurance and genetic information
24. Network centric education
25. Robots in mining and healthcare
26. Workplace safety and spatial information
27. Governance and transparency
28. Memristors and quantum computing

Introduction

This document is designed to help the strategist understand recent trends and developments that matter relating to IT and business innovation. It draws on interviews, onsite research and secondary sources for the period December 2007 to June 2008. It is best read in conjunction with the 2008 edition of The Future of Business 2008-2018, How Information Technology will Transform Industry, Organisations and Work. References to predictions and analysis contained in that report have been appended with the letters ‘FOB’ and the relevant section number.

S2 Intelligence helps businesses innovate through continuous research into emerging technologies and their application in business. For more information on reports, strategic research and advisory services go to www.s2intelligence.com.au. For sales enquiries please call 1300-66-55-20 (Australia) or +61-2-9984-7744 (Worldwide) or email info@s2intelligence.com.au.

Feedback, insights and alternative viewpoints relating to the contents of this document are warmly welcomed and can be directed to info@s2intelligence.com.au.

1. Automating green accounting

S2 interviews in 1Q08 established that carbon accounting in large organisations involved little automation beyond the use of spreadsheets, and considerable estimation. The vast majority of this work has been conducted by the use of external auditors.[1] Our position remains unchanged that the frequency, accuracy and detail of reporting will demand large investments in IT systems to support green accounting processes (FOB 16.2). Information technology will play a crucial role in replacing estimation with measurement. We reinforce our position that this will be required regardless of the timetable for any government reporting regulations, because of growing pressures from trading partners, customers, investors, and staff (FOB 16.3). It is clear that the learning curve for carbon accounting will be steep, and very large gaps exist in today’s frameworks for measuring and monitoring emissions. One area of ongoing contention will be the boundaries for where carbon calculations start and stop across service providers, outsourcing partners and supply chains.

Interviews with current suppliers of sustainability accounting software, such as SAP and Supply Chain Consulting, verified that very small number of enterprises that have so far installed specialised sustainability accounting software of any type, but that take-up was accelerating fast.[2] A key deployment inhibitor was identified as uncertainty relating to regulations (i.e. waiting for them to stabilise). New solutions are now being introduced rapidly into the market, and by early 2009 we expect there to be hundreds of green accounting solutions available to suit specific industries, business types, and processes.

The need to account for green footprints across supply chains (FOB 16.3) may arrive even earlier than expected, as we were made aware of European based manufacturers that have already begun reporting their carbon footprint by individual product and business process in anticipation of trading partner requirements. Carbon labelling is now well under way at Tesco and has apparently been well received, albeit with some confusion over what the labels actually mean. There is a recognition that this first generation of labelling will evolve, and there are indications that the cost to businesses of completing the required calculations will fall rapidly once UK based organisations begin to systemize the process.[3]

2. Projected costs for green accounting

Based on our current predictions for sustainability accounting in business (FOB 8.4, 16.2) we built a model to forecast the total expenditure to be made through 2015 on instrumentation of buildings, factories, vehicles and assets, networking, accounting software upgrades, systems integration and IT services to support green accounting. Total global expenditure came to USD 495 Billion, with 91 Billion applicable to US businesses and USD 6.5 Billion applicable to Australian businesses. Government costs for systems to support monitoring and compliance reporting were excluded.

This was a simple model, and a great many assumptions mean very large potential errors apply to these numbers. Nevertheless, these were the first such estimates to be made and the figures were published and debated across the global media through March and April.[4] A useful comparison was made with Y2K, where expenditure estimates range between USD 300-600 Billion. The bill for green accounting systems, therefore, will likely be higher than Y2K. Unlike Y2K, however, there is a direct financial return associated with systems that successfully reduce the energy and carbon footprints of business operations.

3. Roles for IT in sustainable business

Until 2008 the IT industry has concentrated its sustainability innovation on the important goal of reducing electricity use by computing facilities, especially through technologies that improve the capacity utilisation of all types of computing assets.[5] The first half of 2008 saw awareness of other opportunities filtering into the broader business and IT communities. We continue to highlight the wide range of roles that will be played by information technology in making business more sustainable (FOB 8.4, 16.2, 16.3). These include:

The extension of first generation carbon accounting solutions into all types of sustainability metrics (emissions, energy, water, other natural resources, packaging, waste, etc), and to capture and report sustainability metrics at business unit, process and product levels.

On this latter point, SAP managers shared with us a very valuable perspective. They noted that carbon accounting software needs to extend to accounting for individual business units for individual managers to be made accountable for their choices. They also expect carbon credit trading to extend downwards so that we will see trading of credits between business units inside large organisations.[6] All types of software, from expense management systems to travel planners, will be upgraded to include sustainability accounting functions.

We expect personal carbon monitoring technology to increasingly provide information via handsets. An early example was Carbon Hero, which automatically identified whether the user is walking, driving or taking a train, and displayed personal carbon analysis on the screen of their mobile phone.[7]

Technologies for monitoring the status of forests, farmland, rivers and urban environments, including distributed sensor networks and associated services for aggregating and reporting the data.
Visualisation technologies and services that make sustainability metrics visible—an essential step to change routines and practices.

A stunning illustration of where we are heading can be seen in The Vulcan Inventory[8], which maps carbon dioxide emissions across the United States, every hour, every 10km, making it possible to view diurnal, daily and seasonal variations. This visualisation presently uses historical, 2002 data, but its successor project, Hestia, has ambitions to produce live mapping of emissions, at a building by building level, around the world. Current work is under way to produce visualisation at this detail for the city of Indianapolis. A powerful example of a system using sensor networks to help school communities visualise water use and waste is Hydroshare, created by South East Water in Melbourne, Australia.[9] At the individual household and appliance level, examples of simple energy visualisation tools include the OWL wireless energy monitor (http://www.theowl.com/) and the Wattson (http://www.diykyoto.com/).

The extension of accounting, reporting and visualisation across supply chains (FOB 16.3). We expect carbon information to be gradually ‘connected’ across all types of trading partners via thousands of Web services. The display of carbon information on individual products and processes on websites (e.g. carbon information airlines are now providing for individual flights) will quickly progress to machine interfaces that can be automatically accessed by accounting systems of trading partners.
The adoption and utilisation of all technologies—from video conferencing to online government portals and electronic banking—that directly reduce travel and other activities associated with high energy use.
‘Smart energy’ technologies that optimise power generation and distribution systems (FOB 8.4). The best known example is smart meters that empower individuals to act as change agents to help optimise complex systems. The rollout of smart meters continues to build momentum and a new example in the United States was that of Boulder Colorado, with announcements for the deployment of 50,000 smart meters and the instrumentation of all substations for smart electricity routing. Data is to be transferred between all elements on the grid using the power lines themselves.[10]
Embedded chips and power management software will be used to make all types of appliances, buildings, automobiles and other devices smarter and more energy-efficient.[11]
The use of business analytics and data mining to identify new opportunities to improve energy efficiency and reduce waste in all types of business processes. A powerful illustration of the potential may be seen in the discovery by UPS that vehicles routed with more right-hand than left-hand turns used less fuel because of reduced delays waiting in left-hand turn queues (the reverse would apply in the UK and Australia) and the use of this single insight to save the company 3,000,000 gallons of fuel in 1 year.[12]
Software to improve day-to-day vehicle routing, and management of traffic and transportation grids. Information technology systems used to optimise fuel consumption by commercial aircraft will extend to every form of transportation. Every corporate and government organisation that manages a fleet of vehicles, of any type, will implement solutions to help optimise fuel use.

Beyond just IT developments, we continue to maintain the position that, over the coming decade, sustainability related innovation will drive more new wealth than any other trend.

4. Handsets and business innovation

Decision makers can expect to see an exponential increase in business software available and optimised for use on handsets. More broadly, handset innovation is now taking over from personal computer innovation in driving new business opportunities, and business planners can start thinking of handsets as capable of anything that a personal computer is capable of, interface limitations excepted.

The rate of innovation in handsets is set to accelerate sharply. New handset capabilities are now, for the first time, being powered by an open global community of software developers. Milestone events included Apple opening up its iPhone to developers and Google announcing the results of a developer competition for its Android handset platform, with winners receiving funding to commercialise their ideas.[13] These build on developments in late 2007 such as the formation of the Open Handset Alliance (FOB p-121).

The addition of a ‘virtualisation’ software layer in handsets, so that one handset can run software written to operate on another, is beginning. An example of a handset virtualisation technology provider is VirtualLogix.[14] Handsets are also increasingly taking advantage of ‘cloud computing’ (see Section 5) by accessing, over the Internet, software applications running on remote computers.

In the telecommunications sector, as it becomes possible to run any piece of software on any handset, the notion of telecommunications companies promoting exclusive handset, service and software ‘bundles’ will disappear. Those bundles will increasingly be defined by customers, not providers.

At some point during the course of this year various analysts estimate that more than half of the world’s population will be equipped with handsets. These estimates probably do not take full account of device turnover, but are nevertheless a powerful indicator of the scale of handset ownership, and the increasing role they must play in all aspects of work. S2 Intelligence interviews with business decision-makers confirmed the shift in emphasis from laptops to handsets, especially among senior executives, a group that places a particular premium on portability. Members of this group are asking for, and will gradually receive, access to all enterprise applications (accounting, manufacturing, reporting, business intelligence, etc) via their handsets.

5. Organisational take-up of cloud computing

Developments in the provision of processing, software and storage as online services (FOB 5.1 and 5.2) continue to be rapid, and continue to show the potential to alter almost every aspect of business. These are now commonly grouped under the term ‘cloud computing’. The term comes from the Internet having long been drawn using a ‘cloud’ in conceptual diagrams of information systems.

Fortune 500 companies now have access to online service offerings for all types of enterprise software. In 2008, however, they must still be selective in where and when they make the transition. Network costs are regularly raised as a factor in interviews with decision-makers. Business intelligence software, for example, that crunches large amounts of data accumulated in real time, is often best installed ‘on the premises’ to avoid the time and cost of transporting that data over networks. Overall, however, the transition to cloud computing continues to gather momentum.

At the small business level, it is now practical to adopt cloud computing for all manner of capabilities. Small businesses can now rent an online receptionist service, call management and telephony services, calendaring, collaboration and meeting services, project management tools, contact and customer management services, accounting and office productivity services.

Online accounting services continue to be an important area of innovation, especially through the addition of new, fully electronic business transactions (FOB 5.2). Interesting developments included the announcement by Intuit that its online accounting service is now used by more Americans to fill out tax returns than the software version supplied in a box; and the announcement by MYOB of its diversification into e-mail and website hosting, with plans to add a variety of business transaction services such as invoicing.[15]

We continue to see cloud computing as a strong enabler of collaborative e-business in general (FOB 8.6). Relevant developments included the announcement by Zoho that it would extend online productivity services to include electronic invoicing, and the launch by Salesforce.com of its ‘Salesforce to Salesforce’, or S2S service to facilitate data sharing/transfer between its customers.[16] This would be a logical and attractive step for closely aligned trading partners, or for specialised businesses that group together to form virtual organisations.

6. Office productivity services

When it comes to changing life for the knowledge worker, online services for office productivity software are fast developing into valid offerings for large enterprises. Google continued to enhance its Google Apps (www.google.com/a) offerings, on almost a weekly basis, into a fully fledged head to head competitor to Microsoft Office. To take a few examples, Google added drop-down menus similar to those found in Microsoft Office, added the ability to use Google Apps offline when not connected to the Internet, and released ‘Google App Engine’ for third-party developers to deploy their own applications on top of Google’s infrastructure, a step that will greatly accelerate the rate of innovation.

Meanwhile, Microsoft continues to add online service elements to Office as quickly as it can, with the latest iteration of its strategy given the label ‘Office Live Mesh’, a reflection of its belief that knowledge workers will require flexible combinations of both software and services to meet their future needs. [17]

Although Microsoft and Google are coming from different ends of the spectrum (wholly installed software versus wholly online services) they are converging, and appear destined to meet somewhere in the middle. We continue to expect enormous price pressure on Microsoft Office in the near term (FOB p-47, 136).

Decision-makers should suspend any preconceptions they have around the suitability of service based offerings for office productivity. S2 interviewed the chief information officer for a medium sized business that had already deployed Google Apps to all employees, confirming that, while not quite at a stage where all organisations will be comfortable with the transition, the exercise is already being undertaken with good results. Governments are now looking much more seriously at Google Apps as an option. The District of Columbia in the United States is a leader, and apparently has no qualms about storing government documents and records remotely in the ‘cloud’. S2 interviewed the founder of Zoho (www.zoho.com) a third player in this space. He confirmed that Zoho had reached 1 million registered users in May. More interesting was the insight that a large proportion of them were accessing Zoho from inside very large organisations. So while relatively few large organisations have officially sanctioned the use of office productivity applications ‘in the cloud’, many individual employees are already doing so unofficially.

7. Business and a non-neutral Internet

There was vigorous lobbying from both sides of the debate on net neutrality (FOB 2.4) as the US Federal Communications Commission held new hearings on the subject. On one side were those pushing for guarantees that all types of data traffic will be given equal priority. On the other side were telecommunications companies that want the flexibility to throttle some types of traffic and favour others, which some of them have begun to do. Examples of data packets that might logically be assigned different priorities include remote health monitoring, telephony and videoconferencing, downloading software, music sharing, and e-mail.

Historically, guarantees have not been necessary as traffic has always been handled on a neutral basis anyway, but rapid growth in volume, and dependence on the Internet for all manner of new applications, has created new pressures.

Google is an example of a high profile advocate of neutrality guarantees, presumably to ensure its YouTube video services, now responsible for a sizeable volume of total internet traffic, are not disadvantaged. Comcast is an example of a telecommunications company firmly against them.

We are unable to predict the short term actions of Internet governing bodies, but we have firmed our long term position that the Internet will become less neutral to maintain service levels as demand (escalating data traffic volumes) outpaces supply (investment in network infrastructure). (FOB 2.4)

The best estimates place recent Internet traffic growth at around 50 to 60% per annum. If this rate is maintained, total Internet traffic will be five times 2008 levels by 2012. A variety of factors, however, point to traffic growing at an even faster rate. These include new capabilities to search and manipulate digital video and audio, which will greatly increase use of video in all contexts, not just entertainment (FOB 5.5); the emergence of high-definition and multichannel online video services; a global transition to telephone handsets operating over IP-based networks; a rapid uptake in the use of the Internet as a utility to access software, storage and processing power; and the exponential proliferation of low-cost Internet connected devices (FOB 5.6). The transition to high definition video alone has the potential to multiply total Internet traffic volume many times over.[18] We expect growth in demand to also be accompanied by more extreme fluctuations.

At the same time, fluctuating service levels will become less acceptable as dependencies on the Internet continue to multiply (FOB 6.3). Fast, reliable services are becoming essential for countless day-to-day tasks in businesses.

Infrastructure upgrades are expensive, and telecommunications companies must pursue conservative strategies to ensure an economic return on each investment. Investing in the network capacity required to handle all traffic equally, and with consistently high service levels, is becoming less practical. Improving network efficiency, therefore, will be essential, and while a variety of technologies will produce small improvements,[19] the biggest opportunity lies in giving some traffic a higher priority over others.

How a non-neutral Internet evolves is of considerable importance to all businesses. If telecommunications companies are allowed to prioritise traffic in any way they wish it will inevitably lead to situations of exploitation and price gouging. A far more attractive outcome would be having consistent global standards for how different traffic types are handled. This is also much more difficult to achieve, and developing the framework and associated protocols to support a non-neutral Internet (i.e. where traffic can be prioritised to flow smoothly while maintaining fairness and preventing exploitation) must be considered one of the great challenges for computer scientists and network providers over the next five years.

8. Unlocking customer ecosystems

The Starbucks coffee chain has been notable in engaging customers with the development of products development using online social technologies[20] and there is now considerable experimentation with the use of customer social networks to improve financial services (FOB 11.6). Startups such as Cake Financial and Covestor are adding value by connecting communities of investors with common interests and helping them aggregate and share information on their trading activities.[21] Google continues to be a master at involving large communities in developing its products, recently opening up Google Maps to allow any person to correct names and update locations when businesses move. The Myelin Repair Foundation has emerged as a strong example of using social network mapping software to identify and engage researchers across multiple communities as a way to accelerate R&D (FOB 7.1).[22]

9. Community programming

We have seen a series of steps taken towards realising our predictions for deeper involvement of customers in self customising the online services they use, and in developing and sharing composite services (FOB 7.2).

MIT researchers recently established that commercial websites were more effective when the basic look and feel was adapted to match the cognitive styles of individual customers. Adaptive websites, in other words, will sell more products and services.

Newly introduced tools designed to make online interactive programming easy for the layperson included Microsoft’s PopFly, Intel’s Mash Maker, Yahoo Pipes, Google Sites and IBM Lotus Mashups.[23] Each of these helps people without programming capabilities be more creative and more directly involved in customising software.

To get a picture of where this will go on the commercial domain, business innovators can also take a look at Scratch (http://scratch.mit.edu/)—a programming language developed by MIT and UCLA for children to create interactive stories, games, music and animations, and share their creations with one another.

10. Managing professional profiles

The proliferation of professional social networking sites has already made it impossible for any individual to manage professional profiles on each of them, and we appear to be moving towards the management of ‘master’ profiles which can then be mirrored in multiple places. We can see indicators of this in recent developments. A variety of start-ups allow conversations spanning many social networking sites to be managed from a single place. Examples include Seesmic (www.seesmic.com), which unifies video conversations in one place, and Flock (www.flock.com), which gives a unified browsing experience to many social networks from one place. In May, Google MySpace and Facebook all announced programming interfaces designed to help share profile information across websites (FOB 5.4).

In a similar vein, mechanisms that can produce an aggregate picture of trustworthiness based on online information are going to become very important. An early example can be seen in TrustPlus (www.trustplus.com), launched last year to pull together people’s trust ratings across websites like eBay to do combined reputation scoring.

We note that executive recruiters are now among the most active users of professional social networks such as Linkedin, frequently using the message broadcasting facilities to support ‘fishing expeditions’ for job candidates (FOB 14.1).

11. Worker mobility

Further steps were made towards ensuring knowledge workers can remain connected to communications networks at all times and places.

By the end of 2008, most airlines should be well on the way to having comprehensive network access on all aircraft (FOB 12.1). Qantas and Emirates, for example, announced expansions of existing trials of handset use, and RyanAir announced plans to equip all aircraft with voice and data services.

Interestingly, airlines such as Qantas have shown reluctance to authorise handsets for voice calls (as opposed to data transfer) on the basis that voice conversations can be disruptive to other passengers. This phenomenon will be a short-term one, however, with voice calls quickly becoming routine on all airlines, just as they are on every other form of public transport.

Femtocells have also been receiving plenty of attention. These are very small, low-cost wireless base stations that can be installed inside businesses. They allow any type of cell phone (not just IP-enabled handsets) to place calls through the corporate network, cutting out network provider tolls and replace them with lowest common denominator network charges. It appears that these are now becoming available in attractively priced packages for business.[24] Toll-bypass is also becoming easier through new services from companies such as EQO Communications in Canada (www.eqo.com) which will route international calls from any cellular handset through its servers for the price of a local call (FOB 2.4).

Other interesting mobility related innovations include a proliferation of solutions offering the ability to remotely erase data on mobile phones if they are lost or stolen; the rollout of unified in-car voice recognition systems to access music, telephony and roadside assistance;[25] and new online voice recognition services that take words spoken into handsets and send them over the Internet for interpretation.[26] Natural language innovations like these are now becoming especially valuable as the focus of worker shifts from laptop to handset.

12. Workplace collaboration and telepresence

S2 tried Cisco’s top-end telepresence technology and met with senior managers responsible for developing these systems in February. This led to the following additional insights about where this form of collaboration is today and where it is going (FOB 12.5):

Today’s telepresence technology produces an extremely rich communications experience. The rendering of participants in life-size around a table is most effective, making every subtle facial expression very clear to all participants. There is no doubt that this provides a legitimate alternative to almost any type of face to face meeting within the business.
Latency is especially critical to ensuring a high-quality collaboration experience. There must be an absolute minimum of lag between what is said at one end and heard at the other. This necessitates additional care when setting up longer links (e.g. between Bangalore and Toronto). Cisco promotes the tight integration of its technology components as a key differentiator through reduced latency.
The current all-up cost of such an installation, including hardware, network and services costs for the first year, comes to around USD 220,000, with ongoing costs of approximately USD 6000 per month. Nevertheless take-up is strong (Cisco sold its 500^th telepresence system in April) with the primary justifications in the business case being reduced travel and, increasingly, reduced carbon emissions. The key factor in getting a strong return on the investment is ensuring a high utilisation rate, and Cisco managers recommend deploying these units as open access facilities that can be booked by all employees.
Cisco representatives flagged the ability to improve upon the already impressive experience by further optimisation of person to person eye contact between each individual attendee, but noted that this will use three to four times the current bandwidth, which most customers would not be prepared to pay for today (multiple video streams would be required per participant).[27]
At the present time, real-time translation (FOB 12.5) is done by conferencing in a human translator as a service. Real-time machine translation was acknowledged as a likely future capability.

A separate notable innovation in machine translation was Asia Online’s launch of web translation services for Asian languages that have received little focus to date. This will allow English language websites to tap into new audiences in countries such as Thailand and Indonesia, as well as facilitating SMS communication and electronic document translation to Asian languages.[28]

Based on what was shown at the Consumer Electronics show in Las Vegas, a variety of micro projectors will be available imbedded in handsets by 2010, allowing workers to use projected images to supplement communications in more places and contexts (and no doubt contributing to the overuse of PowerPoint slides in the workplace).[29] Given the energy requirements for decent image projection, it is likely that a power cord will be mandatory in most situations, but it will still offer a big step forward in convenience.

A marker for the current status of transmitting thoughts as short messages to colleagues (FOB 12.3) was seen in Audeo (http://www.theaudeo.com/), a wireless neckband that can translate a small vocabulary of thoughts into speech.

13. Lie detection in the field

We saw a milestone in lie detection technology with the field deployment of the PCASS handheld, multi-language voice stress detector to US military personnel in Iraq and Afghanistan. Claimed accuracy is between 80 and 90%. It is understood that future versions of the machine will include thermal facial imaging to capture data from hot flushes caused by stress.[30] This deployment brings us a step closer to our projections for lie detection in call centres and other commercial environments (FOB 11.3).

14. Advertising targeting and relevance

We continue to see new capabilities for making advertisements even more finely targeted to specific audiences and contexts (FOB 10.2). Navic Networks (http://www.navic.tv/), for example is making it possible to collect more detailed information on viewer behaviour via set top boxes in order to target digital advertisements selectively, and Predictive Networks is producing software to infer the identities of individual television viewers by analysing the unique ways in which they use their TV remotes. Google launched Adsense for video as a limited beta. Text based advertisements can now be overlaid onto videos and advertisers can control at what point in the video that the advertisement appears.[31] Similarly, Blinkx began overlaying advertisements on video, chosen by software listening to speech from the soundtrack on the video clip. It also began rewarding people that share or imbed video clips by giving them 50 percent of the advertiser’s click-through payments.[32]

Through 2010, we expect new methods of targeting to challenge what people are prepared to accept regarding how their personal information is used, especially with regard to serving advertisements to handsets, where limited screen real estate and heightened interruptive/annoyance factors apply (FOB 10.4). In the longer term, however, we expect the use of detailed behavioural information to serve advertisements to become routine.

We can see evidence for this in the following events. In April, a survey by Harris Interactive, found that 59% of people were “not comfortable when websites like Google, Yahoo! and Microsoft (MSN) use information about a person’s online activity to tailor advertisements or content based on a person’s hobbies or interests”,[33] but when broken down by age group revealed a strong relationship between level of concern and age, with older respondents most concerned and younger respondents less so. Younger people also demonstrated acceptance of highly targeted advertising in their take-up of advertising supported telephone plans offered by Blyk (www.blyk.co.uk) in the UK, which signed up its first year subscriber targets well ahead of schedule.[34]

Leading advertising companies, it should be noted, continue to find new ways to engage customers in a very positive way through interactive conversations with customers, and by tagging advertising to entertaining, innovative services.[35]

15. In-store servicing, intelligence and advertising

As anticipated, Australian supermarkets began rolling out self checkout systems in larger numbers (FOB 11.5). The systems function well but are relatively awkward when used for the first time. Direct onsite observations confirm no shortage of shoppers opting to use them as a way to avoid queues. There remains plenty of room for improvement, but the current generation technology appears to be delivering good results for retailers.

In the United States, ShopRite stores are expected to test shopping carts equipped with consoles in the second half of 2008. The consoles are designed to provide services such as price comparisons, in-store navigation to specific items, display of store specials, recipes, presentation of electronic shopping lists in aisle order, scanning of items into the basket and expedited checkout. Putting a unique screen in front of each shopper will make it even simpler to deploy individually targeted advertisements. Advertisements tailored to the location of the cart within the supermarket are apparently already planned.[36]

While scanning items into the shopping basket offers an improvement of service it will not eliminate checkout queues as shoppers today are still left to execute a separate payment process before they can leave the store. The most significant step in retail servicing will come when both scanning and payment can be automated to the point where the queue is eliminated.

S2 interviews turned up some new considerations with respect to the transition to electronic price tags on supermarket shelves (FOB 11.5). Current LCD-based price tags are apparently difficult to read under fluorescent lights, and there are concerns that screen sizes may be insufficiently large to display future information requirements (e.g. carbon footprint information). In one Australian supermarket chain, the labour in price labelling comes to approximately one person, per store, per day, which helps put into perspective the potential labour savings from electronic price tags (the annual salary of one storeperson multiplied by number of stores). Although business cases are currently focused on potential labour cost savings, we believe they will soon factor for the financial benefits of changing prices more frequently (which will increase revenues through more finely targeted promotions, and through responding to variations in supply and demand more precisely), and the financial benefits of close integration of shopper analysis, in-store advertising and electronic pricing systems.

Dynamic pricing in retail stores and the move to dynamic pricing in electricity (Section 3), may be seen as part of a more universal trend: in every industry, information technology is making it possible to change pricing more frequently, and to match variations in supply and demand more closely.

The combination of dynamic in-store advertising with analytics to serve custom advertisements to individual shoppers is getting closer (FOB 10.2). In-store video advertising is working well in chains such as Tesco in the UK and Wal-Mart in the United States. A study by Retail Systems Research found in-store TV increased overall sales by 2% and that very short advertising spots (5-15 seconds) were most effective.[37] The Woolworths grocery chain in Australia vastly improved its market intelligence capability by issuing a new loyalty card. The “Everyday Rewards” card (www.everydayrewards.com.au) was interesting because it allowed shoppers to redeem fuel discounts at a large number of participating service stations, achieving a wide, multi-store view of shopper behaviour (FOB 9.5) for apparently very little investment in technology infrastructure.

Another interesting example of the emerging analytics economy (FOB 9.6) is aCerno (www.acerno.com), which combines data across more than 450 brands and multichannel Internet retailers to mine shopper data, while preserving the privacy of individual shoppers. It has amassed considerable data over four years to assist in predicting shopper behaviour and brokering these insights to any retailer or advertiser.

16. Changing roles in advertising agencies

The previous sections illustrate how life is becoming more and more complex for advertising buyers, and reinforce our prediction regarding automated advertising brokers (FOB 10.2).

The annual State of the News Media report[38] also pointed to changes taking place to advertising and media organisations. The business of planning and buying media, which was once a minor department within ad agencies, has been getting more complex with multi-channel advertisement placement, and the report concludes that media placement and creative advertising functions are destined to be split into two completely separate businesses.

This document is essential reading for all decision-makers in the news media and advertising industries. It also reported the continuing decline in newspaper advertising revenues—down 5.2% in 2007 compared to 2006. The Newspaper Association of America estimated the decline to be even greater at 9.4% – the biggest reported drop since 1950.[39]

17. Customer service and biometrics

Meetings with executives at VeCommerce (www.vecommerce.com) provided new insights on the status of speech recognition and voice biometrics in the call centre context (FOB 11.3).

The technology is already sophisticated enough to determine gender, approximate age, nationality, and racial background from voiceprints. At this time, however, less than 5% of ‘consumer to business’ calls take advantage of speech recognition, and only a very tiny fraction of these use biometrics to recognise callers automatically. Large call centres, in other words, are just beginning to do automatic recognition and authentication of callers using their voice prints.

Early adopters are the major banks. These will be closely followed by healthcare organisations and government services. We expect adoption to accelerate quickly due to changed service customer expectations, and that by 2012 almost all very large call centres will routinely use automatic call steering and navigation to improve service levels. Related to this, we expect leaders to by then routinely use facial expression analysis to improve over-the-counter servicing.[40]

18. Banks as shared service providers

Two Australian banks, National Australia Bank and The Commonwealth Bank of Australia (CBA) announced significant plans to upgrade their software infrastructure. The announcements are indicative of the general challenge of aging software in this sector, and the desire to update it to support real time processes and new innovation. Of particular interest was the commentary from CBA executives that a primary reason for re-architecting its software was to position the bank to provide ‘white label’ services to other banks in Asia.[41] This ambitious undertaking is indicative of our forecasts regarding new software architectures helping create new services and new lines of business (FOB 7.4).

19. Diminishing value in insurance broking

S2 Intelligence interviews confirmed Aon Risk Services is an example of the transitions taking place in the insurance sector with new opportunities to create information services around risk analysis and diminishing value in broking services (FOB 7.5, 9.5, 11.2). Aon is well down the path to transforming its business into a provider of services to optimise risk management. Risk analysis is offered on all aspects of a client’s businesses, gaps in cover are identified, exposures quantified, and fraud management services are available. Aon is effectively transitioning into a management consulting company, and creating significantly more value for its customers.

20. Electronic movie distribution

The movie industry continues its bumpy transition towards electronic distribution (FOB 11.2, 11.5). Electronic distribution of movie titles by companies such as Disney has been resisted by US retail chains that reportedly threatened to cut floor space allocation to DVD sales. An Australian DVD rental chain announced plans in April to move to digital downloads by supplying a proprietary set-top box to customers, then having them come to stores to download movies from in-store kiosks to portable storage devices, an experience that offers no improvement on renting a physical disk, not to mention the continued rental of expensive retail space by the business[42]. Warner Music pushed for a music tax as a way of funding artists and recouping revenues lost to music piracy, an idea that would be completely unacceptable to the general public.[43]

These diversions notwithstanding, the pace of the transition appears to be accelerating for movies, and we will soon see a critical mass of titles at attractive prices and via legitimate online channels. In five years we expect Hollywood to be making as much money through all online channels as it does through distribution to cinema networks. A key technical factor is the resolution of many digital rights management schemes into something simpler and easily manageable by all audiences, an area in which Apple’s iTunes has already set the benchmark in music (FOB 5.11).

21. Video analysis, security and policing

The deployment of camera networks and video analysis software to enhance public security continues apace in cities around the world.

Of particular interest is the increasing public/private overlap (FOB 17.4). Two-thirds of cameras deployed in the latest project in New York City will be privately owned by large financial companies but networked into the broader system.[44] Also indicative was the move by police in Sydney, Australia, to set up databases of all privately owned closed-circuit TV cameras in the central business district so that they could access private footage much more rapidly.

There is a general tendency to overestimate face and object recognition capabilities of computers that monitor public camera networks. Accuracy is nearly 100% in controlled conditions, but much lower in the variable lighting conditions and angles typical of everyday footage of people in public places. The dominant application of face recognition in 2008 remains forensic (looking for archived footage of people identified as suspects after the event) rather than pre-emptive (identifying people behaving suspiciously and tracking them before the event).

This comment notwithstanding, the pace of innovation in face recognition appears to be brisk, with new methods and claims announced every few weeks. Examples include claims by University of California at Berkeley of a new approach to face recognition that can provide 90 to 95% accuracy even when parts of faces are obscured, and MIT’s 80 Million Tiny Images project that exploits remote image databases to improve accuracy.[45] Given the volume and complexity of face recognition claims being made, the most useful benchmarks for progress going forward will come from competitions such as the Face Recognition Vendor Test’s Grand Challenge (http://www.frvt.org/FRGC/).

Improved face and object recognition will foster many new applications on handsets. By the end of 2009, for example, we can expect handsets to recognise monuments and landmarks we photograph and automatically pull up associated tourist information.[46]

Compared to camera networks, a far more potent example of IT innovation in policing and security is seen in the city of Richmond, Virginia, where software is being used to conduct continuous analysis of crime statistics by location, time of day, and coincidence with other types of events. The system identifies patterns, produces crime alerts and predicts new crime events in advance, which has facilitated more effective deployment of police resources (for example boosting police patrols in particular neighbourhoods to offset known patterns of armed robberies). The initiative is believed directly responsible for a reduction in crime of 21% in 2005-2006 and a further 19% in 2006-2007.[47]

22. Health records

In May, Google moved to establish a presence in electronic health records (FOB 11.8) with Google Health (http://www.google.com/health), complementing Microsoft’s earlier foray with Health Vault. A close look at Google Health indicates that it can import medical records from hospitals, laboratories and pharmacies, with users needing only to login to participating health providers to confirm permission to transfer the information. The service also analyses stored information to match people to external information services, medical databases and health providers relevant to their conditions. There is an open question here relating to public trust. At this time we believe Google and Microsoft are both a long way from enjoying the level of community trust needed to be dominant players in health record management. At the very least, however, they are already greatly increasing community awareness of e-health records and their potential benefits, and stimulating action in the public sector.

The matching of patients to online information providers can be seen as part of the broader trend for patients to demand more information relating to their treatments. There are now many online resources to help patients connect, discuss and exchange information with one another.[48] We believe this will steadily extend into the doctors office so that high quality reading and supplementary medical information is routinely offered to patients at the time of diagnosis. This trend will also see the medical research and medical treatment communities becoming more closely intertwined over time.

Progress towards a national e-health record in Australia continues to be poor, and there was a change of leadership in the National Electronic Healthcare Transition Authority (NEHTA). Based on additional interviews with health practitioners we note a continued lack of meaningful engagement with both practitioners and the public. Neither community has been sold on the benefits of electronic health records, let alone been brought to the stage of proactively helping to make them happen. Other electronic transaction developments in health care have been much more promising. According to Medicare Australia, for example, Australians are receiving financial rebates in real-time, at the point of care, on more than 95% of transactions on eligible medicines under the Pharmaceutical Benefits Scheme.

A European Commission study provided some interesting indicators of electronic health progress in that part of the world, confirming that almost 92% of general practitioners are storing medical diagnoses and medication information electronically, around 35% are storing radiological images electronically and about 6% are doing e-prescribing. Remote monitoring of patients (FOB 11.8) is practiced by around 3% of general practitioners in Iceland and the Netherlands, and by about 9% in Sweden.[49]

23. Health insurance and genetic information

Consumer personal genetic services are now increasing rapidly. The leaders[50] here are now branching out from genomic testing to interpretation, counseling and DNA storage services. The notion of continuous testing—to take advantage of improving technologies and genetic insights over time—has been introduced with corresponding annual subscription services. Within five years, we expect major health-care providers will need to partner with personal genomic testing companies to meet the service expectations of their patients.

In May, the United States enacted legislation, The Genetic Information Nondiscrimination Act, 2008, to prevent health insurance companies and employers from denying or canceling health cover, changing premiums or making any employment decisions based on genetic test results. This likely sets back our projected timeframes for insurance gaps (FOB 11.7) but it will not resolve them: we expect insurers to continue to heavily invest in information systems that help them avoid signing on customers with high genetic risks. Furthermore, we continue to expect favourable personal testing results to be voluntarily employed by customers as a way to negotiate reduced premiums (FOB 11.7).

24. Network centric education

In higher education, we expect leading primary and secondary school systems to be more and more network centric (FOB 13.1). The network is playing a bigger and bigger role in delivering a rich educational experience. Furthermore, central management of applications is opening the way to flexible access to applications from any device, a reduction in technology support requirements in public schools (so that more human resources can be focused on teaching) and a reduction in the amount of capital tied up in laptops. The new Australian government, however, appears to be missing these opportunities. It directed significant new funds to information technology in schools, but targeted them specifically towards the deployment of large numbers of laptops.

25. Robots in mining and healthcare

The key frontiers in the industrial application of robots continue to be mining, health-care and defence. An interesting indicator of progress in mine site automation (FOB 8.1) was released by an executive at Rio Tinto who noted that robotic drills and haulage trucks would be working side by side by the end of 2008, with a very high level of automation of mine site equipment expected within five years. Both Komatsu and Caterpillar are turning out autonomous trucks for mine sites, and the CSIRO is working on autonomous drills, haulage trucks and machines to extract ore from underground coal seams.[51]

In healthcare, a Japanese company announced what appears to be a particularly impressive roboticised healthcare assistant (FOB 11.8) called the Hybrid Assistant Limb, which functions as an exo-skeleton to help patients with impaired movement or motor neuron damage. Power consumption is clearly a limiting factor, with continuous operating time of 2 hours and 40 minutes. Production of 500 units per year is expected to begin in October.[52]

In defence, impressive vision of a roboticised all-terrain pack animal was released by Boston Dynamics (www.bostondynamics.com), which has been developing it since 2006. It runs at 4 miles/hour, climbs 35 degree slopes, walks across rubble, and carries a 340lb load. Although unstated, there is clear potential for it to be weaponised.[53]

26. Workplace safety and spatial information.

Our prediction regarding wireless personnel tracking on vessels (FOB 17.1) was validated by information that the Australian Navy is running trials in 2008. It is understood that an innovative local company called Blue Glue (www.blueglue.com.au) is involved. Given the traditional role of defence as a leading adopter, our projected timeframe for merchant vessels appears realistic, at least for leading companies.

Large construction companies are already routinely tracking individual personnel on construction sites using smart tags and we continue to expect this to extend to GPS-based tracking as the costs fall, as well as being linked to alerts and cut-outs when people enter safety zones around heavy equipment.

In other spatial developments, GPS is becoming more usable on handsets with the introduction of ‘assisted GPS’ services, which reduce the delay in obtaining a location ‘fix’ when devices are switched on, and as RFID tags continue to increase their range and come down in size. An interesting indicator of progress can be taken from the ‘powder’ RFID tags developed by Hitachi, which measure less than 0.05 mm on each side, have a range of around 30 cm, and are designed to the embedded in individual tickets, paper documents or currency.[54]

27. Governance and transparency

In April, another site to increase transparency in government decision-making (FOB 15.1) was launched by Lawrence Lessig at Stanford University, called Change Congress (http://change-congress.org/). It allows anyone to quickly find out what the politicians have promised versus what they are committed to, and works on community-based principles of information gathering and sharing. Sites like this and Wikileaks (www.wikileaks.org) continue to demonstrate the potential for information technology to play transform both public sector and corporate governance. Another example of government embracing new online mechanisms to involve communities more directly in decision-making (FOB 15.2) is the District of Columbia’s use of Wiki’s to foster open dialog with bidders during procurement processes.[55]

28. Memristors and quantum computing

Two fundamental computer science developments may have significant implications for business innovation over the long term.

A fourth fundamental element in computer circuits has been proved to exist, and has been named the ‘memristor’. The memristor complements resistors, capacitors and inductors by having properties that cannot be duplicated by any of the other components. Essentially, it can ‘remember’ changes in current passing through it by changing its resistance. This has opened up new ways of thinking about the design of computers. It appears certain, for example, to make memory technologies faster and more energy-efficient, and could make booting computers much faster (as fast as tripping a light switch for example).[56]

In quantum computing, some doubt has been thrown on the claims made by D-Wave in 2007 with regards to progress towards commercially deployable quantum computers. Representatives of that organisation have apparently admitted an inability to prove their computer is doing quantum computation and have sought outside assistance to verify their own claims.[57] We maintain an extremely conservative view on the timetable for commercial quantum computing (FOB 1.5), and emphasise that a high margin for error applies to all forecasts in this field.

Copyright

Disclaimers

Contacting S2 Intelligence

S2 Intelligence helps businesses innovate through continuous research into emerging technologies and their application in business. For more information email info@s2intelligence.com.au. Feedback, insights and alternative viewpoints relating to the contents of this document are warmly welcomed and can be directed to info@s2intelligence.com.au.

References and further reading

[1] Auditors have already been reporting data collection as a key challenge. See Lynch, D 2008, ‘Data, the key to green order to success’, The Australian Financial Review, March 14.

[2] Supply Chain Accounting, for example, shared with us that it expects to triple the number of installed sites for its Carbon View solution (www.carbon-view.com) in the next six months.

[3] See Murray, J 2008, ‘Tesco defends carbon label scheme’, IT Week, May 21, http://www.itweek.co.uk/business-green/news/2217167/tesco-defends-carbon-label.

[4] See, for example, The Australian Financial Review 2008, ‘Business hit with $7bn emissions bill’, 29 April, p-1.

[5] Data centres are understood to account for approximately 1.5% of total US electricity consumption.

[6] Particular thanks to Stefan Goehring, manager of SAP Performance Optimization Applications, for sharing his perspectives on this subject.

[7] See BBC 2007, ‘Tracking carbon through your phone’ 22 August, http://news.bbc.co.uk/2/hi/technology/6957235.stm

[8] See The Vulcan Inventory. Gurney, KR, Seib, B, Ansley, W, Mendoza, D, Fischer, M, Miller, C, Murtishaw, S 2008, The Vulcan Inventory, version 1.0, Purdue University, http://www.purdue.edu/eas/carbon/vulcan/research.html and http://www.purdue.edu/climate/hestia/index.shtml.

[9] See South East Water, HydroShare, http://www.southeastwater.com.au/personal/education/waterconservationinschools/pages/hydroshare.aspx.

[10] See Xcel Energy, SmartGridCity, http://www.xcelenergy.com/XLWEB/CDA/0%2c3080%2c1-1-1_15531_9777_49182-39884-0_0_0-0%2c00.html and http://www.xcelenergy.com/docs/SmartGridWhitePaper.pdf.

[11] An example of a company that manufactures chips for this purpose is Echelon Corporation (www.echelon.com).

[12] See Lovell, J 2007, ‘Left-Hand-Turn Elimination’, The New York Times, December 9, http://www.nytimes.com/2007/12/09/magazine/09left-handturn.html?_r=2&oref=slogin&oref=slogin.

[13] See Chen, J 2008, ‘The Top 50 Applications’, Android Developers Blog, May 12, http://android-developers.blogspot.com/2008/05/top-50-applications.html.

[14] See Virtual Logix (www.virtuallogix.com).

[15] See TurboTax (http://turbotax.intuit.com/), MYOB (www.myob.com.au), and Gedda, R 2008, ‘MYOB moves into domains, hosting’, Computerworld, May 12, http://www.computerworld.com.au/index.php?id=1599277168, and The Economist, ‘Pain in the aaS’, April 24, http://www.economist.com/business/displaystory.cfm?story_id=11090522.

[16] See Zoho (http://invoice.zoho.com/login/jsp/login.jsp) and www.salesforce.com.

[17] Microsoft 2008, ‘A First Look at Live Mesh’ April, available from www.microsoft.com. In March 2008, Microsoft upped the ante with regard to software as a service, with Bill Gates announcing that it would provide software as a service to “businesses of all sizes”. See the original press release at http://www.microsoft.com/presspass/press/2008/mar08/03-02AllSizeBusinessesPR.mspx. this follows Microsoft’s earlier announcements about its general roadmap for software as a service in September 2007, see http://www.microsoft.com/presspass/press/2007/sep07/09-30RoadmapForBusinessPR.mspx

[18] An excellent source of information on Internet traffic data is the Minnesota Internet Traffic Studies (http://www.dtc.umn.edu/mints/home.html). Cisco is also room released several interesting studies projecting traffic growth. See Cisco, 2008, ‘The exabyte era, white paper, January; and Cisco, 2008 ‘Global IP traffic forecast and methodology, 2006-2011’ white paper, January, http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.html. For a sense of day by day traffic statistics see the Internet traffic report (http://www.internettrafficreport.com/).

[19] Mapping of Internet traffic has shown that the Internet is overly hierarchical, for example, and inefficiencies can be realised by rerouting traffic so that it does not have to pass up through the hierarchy. See MIT Technology Review, 2007, ‘A better view of the Internet’, September /October, page 110.

[20] See My Starbucks Idea (http://mystarbucksidea.force.com/home/home.jsp).

[21] See Cake Financial (www.cakefinancial.com) and Covestor (www.covestor.com).

[22] See Myelin Repair Foundation’s Accelerated Research Collaboration (http://www.myelinrepair.org/research_model/accelerated_research_collaboration.shtml)

[23] See Microsoft’s Popfly (www.popfly.com), Intel’s Mash Maker (http://mashmaker.intel.com/), Yahoo’s Pipes (http://pipes.yahoo.com/pipes/), Google’s Accounts (http://sites.google.com/), IBM’s Lotus Mashups (http://www-306.ibm.com/software/lotus/products/mashups/).

[24] See www.femtoforum.org, www.thinkfemtocell.com and Reed, B 2008, ‘Can femtocells live up to the hype?’, Network World, January 8, http://www.networkworld.com/news/2008/010808-femtocell.html

[25] See, for example, the Sync system (www.syncmyride.com) which began rolling out in new cars manufactured by Ford and Mercury in the United States.

[26] Vlingo (www.vlingo.com) is an example of a company that offers such services. This is also a strong example of cloud computing to the handset (see Section 4, above), where a remote server is doing the interpretation work and sending the results back to the handset.

[27] Particular thanks go to Charles Stucki, VP and General Manager of the telepresence systems business unit at Cisco Systems, for sharing his insights.

[28] See News release, 2008, Asia Online, June 5, http://www.asiaonline.net/corporate/news.aspx#News09

[29] See, for example, Light Blue Optics (www.lightblueoptics.com).

[30] See the Lafayette Instrument Company (www.lafayetteinstrument.com).

[31] See Schiffman, B 2008, ‘Google’s AdSense Goes Video’, Wired, February 21, http://blog.wired.com/business/2008/02/google-launches.html, Strange, A 2007, ‘Google Announces Adsense For Video’, Wired, May 23, http://blog.wired.com/business/2007/05/google_announce.html#previouspost.

[32] See http://adhoc.blinkx.com/

[33] See The Harris Poll, 2008, ‘Majority Uncomfortable with Websites Customizing Content Based Visitors Personal Profiles’, April 10, http://www.harrisinteractive.com/harris_poll/index.asp?PID=894.

[34] See Lomas, N 2008, ‘Blyk Mobile Service Off to a Fast Start’, BusinessWeek, April 25, http://www.businessweek.com/globalbiz/content/apr2008/gb20080425_077181.htm?campaign_id=rss_daily

[35] A good example of this phenomenon is the use of interactive messaging services to draw attention to advertisements by encouraging bar patrons or sports fans to send messages to electronic billboards which intersperse them with advertisements. See, for example, The Conversation Group (http://theconversationgroup.com/).

[36] The carts are jointly developed by Microsoft and MediaCart Holdings Inc (www.mediacart.com). See MediaCart press release, January 14, 2008 http://www.mediacart.com/pressrelease.html.

[37] See Retail Systems Research (www.retailsystemsresearch.com) and The Economist, 2008, ‘How not to annoy your customers’, January 3, http://www.economist.com/displaystory.cfm?story_id=10431119.

[38] See the Project for Excellence in Journalism, ‘State of the News Media 2008’, March, http://www.stateofthenewsmedia.com/2008/.

[39] See Newspaper Association of America (www.naa.org).

[40] Smile measurement software, for example, is already available from companies such as Omron (www.omron.com).

[41] See Bajkowski, J 2008, ‘CBA overhaul taps SAP and Accenture’, The Australian Financial Review, April 29, page 29 and Kennedy, S and Sharma, M 2008, ‘$580 million to rejig 60′s bank system’, April 29, The Australian, page 31.

[42] Dawes, B 2008, ‘Video Ezy on track for in-store VOD’, CNet, April 18, http://www.cnet.com.au/dvdpvr/0,239035801,339288272,00.htm

[43] See Gustin, S 2008, ‘Fee for All’, Portfolio.com, March 27, http://www.portfolio.com/news-markets/top-5/2008/03/27/Warners-New-Web-Guru

[44] See Shachtman, N 2008, ‘NYC is Getting a New High-Tech Defense Perimeter. Let’s Hope It Works’, Wired Magazine, April 21, http://www.wired.com/politics/security/magazine/16-05/ff_manhattansecurity.

[45] See Gardiner, B 2008, ‘Engineers Test Highly Accurate Face Recognition’, Wired, March 24, http://www.wired.com/science/discoveries/news/2008/03/new_face_recognition and Torralba, A, Fergus, R and Freeman, WT 2007, Computer Science and Artificial Intelligence Lab, Massachusetts Institute of Technology, http://people.csail.mit.edu/torralba/tinyimages/.

[46] See the Apollo/Eye-Phone image recognition technology from SuperWise Technologies AG (www.superwise-technologies.com).

[47] See Henschen, D, 2007, ‘Police Department Wins Gartner’s 2007 BI Excellence Award’, Intelligence Enterprise, March 20, http://www.intelligententerprise.com/showArticle.jhtml?articleID=198100280

[48] See, for example, iMedix (www.imedix.com) and e-patients.net (http://e-patients.net/).

[49] See ‘Benchmarking ICT use among General Practitioners in Europe’, Bonn, April 2008, available at http://ec.europa.eu/information_society/eeurope/i2010/docs/benchmarking/gp_survey_final_report.pdf.

[50] Companies such as Navigenics (www.navigenics.com) 23andMe (www.23andme.com) and deCODEme (www.decodeme.com).

[51] See Woodhead, B 2008, ‘Mining spree drives robot boom’, The Australian, February 12, page 27.

[52] See Cyberdyne Inc (http://www.cyberdyne.jp/english/index.html).

[53] See Boston Dynamics (http://www.bostondynamics.com/content/sec.php?section=BigDog).

[54] See Hitachi Central Research Laboratory (http://www.hqrd.hitachi.co.jp/crle/).

[55] The Economist 2008, ‘Look it up on the Web’, February 16, page 6.

[56] See Beckett, J 2008 ‘Demystifying the memristor’, HP Information and Quantum Systems Lab, April, http://www.hpl.hp.com/news/2008/apr-jun/memristor.html?jumpid=reg_R1002_USEN.

[57] See Lloyd, S 2008, ‘Riding D-Wave’, MIT Technology Review, May/June pp 78-80.

TERMINOLOGY

JM — Mon, 28 Sep 2009 08:45:29 +0000

Business terms

Large business	Businesses employing 200 or more people. Where no size is specified, all predictions in this report refer to large organisations.
Medium business	Business employing 20-199 people.
Small business	Business employing 1-19 people.
Leader	Business quick to identify when an emerging technology will deliver value, and executes especially well in adopting and implementing it.
Routine	When a technology or practice is adopted as ‘business as usual’ by a range of mainstream organisations (not just experimentally, and not just by leaders).
Early adopter	One of the first 15 % of businesses to adopt a technology.
Late adopter	One of the last 15 % of businesses to adopt a technology.
Knowledge worker	Person that works primarily with information, as opposed to applying physical or manual skills, in their day to day activities.
Information-intensive	Business primarily built on the processing and exchange of information, including news media, insurance, financial services, creative design, education.
Product-intensive	Business primarily built on the manufacturing and distribution of physical goods, including manufacturing, wholesale, retail.
Primary industry	Business focused on mining and agricultural production.
Fortune 500	Business in the top 500 US corporations by revenue (as published annually by Fortune magazine)
Global 500	Business in the top 500 global corporations by revenue (as published annually by Fortune magazine)

Technology terms

Bit, byte	The most basic measures of digital information. A bit, or binary digit, is the smallest measure, where information is stored in either of the two states ‘0’ or ‘1’. A byte is comprised of 8 bits and is the unit used by computers to store a single letter or character.
MB, GB, TB, etc	Larger measures for quantity of digital information, most frequently used in relation to storage capacity. 1 kilobyte (KB) is 1,000 bytes, a megabyte (MB) is 1,000 kilobytes, a gigabyte (GB) is 1,000 megabytes and a terabyte (TB) 1,000 gigabytes. The progression continues with petabytes (PB), exabytes (EB), zettabytes (ZB) and yottabytes (YB). This report follows common usage where each is a multiple of 1,000 times, rather than the classic definitions where each is a multiple of 1,024.
Gigaflop, Teraflop, etc	Measures of computer processing speed. 1 megaflop is 1 million floating-point operations per second, a gigaflop is 1 billion, a teraflop is 1 trillion and a petaflop 1,000 trillion.
Mbps, Gbps, etc	Measures of information transmission speed or network throughput. 1 kilobit per second (Kbps) is 1,000 bits, 1 Mbps is 1,000 Kbps, 1 Gbps is 1,000 Mbps, 1 Tbps is 1,000 Mbps, etc.
Broadband	Any network with transmission rates significantly faster than ordinary telephone lines. This report follows common usage, rather than the classic definition of any technology transmitting multiple channels of data simultaneously over a network.
Spatial, temporal	Spatial information relates to space or location (e.g. GPS, map references); temporal information relates to time and timing (e.g. event logging).
Nanotechnology	Technology designed and engineered in nanometre scales (1 nanometre = one billionth or 1×10^-9 of a metre).
Handset	Generic term for hand-sized personal computing devices such as mobile telephones, personal digital assistants, palmtop computers and, increasingly, devices that combine all these functions.
Avatar	A computer generated representation of a person.
Console	Any screen interface. May be part of a workstation, control unit, handset, etc).

INTRODUCTION (2008)

JM — Mon, 28 Sep 2009 08:16:33 +0000

PURPOSE

This report was created to help businesses innovate. Over the next ten years information technology developments will change, profoundly, the way business is conducted. Early planning, and response, to these developments is critical to sustained business performance. It is intended for people in all types of roles—CEOs, innovation managers, strategists, financial officers, product managers—to equip them with knowledge, creativity and foresight as they try to plan for the future and turn this change into opportunity. It is also intended for government executives and policy makers, and to be used by managers in technology companies and R & D organisations with responsibilities for developing new market opportunities.

In order to provide as much value as possible in this context, the Future of Business:

Focuses squarely on business outcomes, with the technological details playing a supporting role.
Is written in plain English, with a minimum of technical jargon, to make it as accessible as possible.
Provides a single, comprehensive framework to cut through the millions of pages written on IT & business that no manager has time to assimilate, and to elevate the manager past ad hoc learning via news items, conversations and occasional seminars.
Spans all types of business processes, with examples across all types of industries, to introduce as many different ideas and innovations as possible.
Takes a far-reaching view to equip the business person to think beyond the developments already well known to competitors.

USING THIS REPORT

Part I

Part I sets down the key information technology trends, their relative importance and their rate of progress. Business readers may choose to skip directly to Part II, but wherever time permits they are encouraged to review this section, as the underlying technology trends provide a foundation for adapting ideas and plans when breakthroughs occur, or when developments take an unexpected turn. Part I has been written as concisely as possible with the business reader in mind.

Part II

Part II is devoted exclusively to forecasts about industry, organisations and work. From the point of view of the business innovator, this is the most valuable material: each prediction offers a point that can be communicated and debated, and which can trigger new ideas about opportunities and emerging challenges. Managers are encouraged to discuss and workshop predictions with colleagues in the context of the products, services, markets, competitors and goals that apply to their business. The content is organised into sections grouped under business themes. Rather than conforming to a rigid taxonomy, the sections have been selected to communicate the most important changes that lie ahead. The sections may be read consecutively, or selectively to match current business priorities.

SCOPE

Forecast horizon

The scope of this report is the next ten years. The goal is to make forecasts based on real information, even if the information is occasionally very thin, and to avoid stepping into the realm of pure speculation. Ten years is a reasonable limit to forecasts based on known developments in computer science, business and society. Equally, short term forecasts dealing in months rather than years are excluded because they fall into the realm of conventional wisdom, and are of little value to an audience seeking to innovate and build lasting competitive advantage. Furthermore, the market for short term analysis is already well served by stock analysts and consultants.

A small number of predictions beyond the ten year horizon have been included where they clarify or emphasise a particularly important trend.

Geographic focus

This edition of the Future of Business is focused on three countries—the United States, United Kingdom and Australia—which share many common characteristics and contain most of the audience for S2 Intelligence research conducted between 2002 and 2007. Except where otherwise specified, all trends and predictions apply to the future of business in these countries. Readers with a focus on other geographies are encouraged to re-interpret or adjust predictions based on their knowledge of the local context.

Organisational focus

Although a variety of predictions are included that deal with small and medium sized businesses, the organisational focus of this report is on large organisations (enterprises employing more than 200 people). Except where otherwise specified, all of the trends and predictions apply to the future of business in large organisations.

PREDICTIONS

Predictions are powerful because they force the researcher to distil complex ideas into best guesses, based on what is known now, and they present the lay person with a single crystallised picture of a likely future.

Each prediction communicates, in a single concise statement, expectations about a new development, the rate of change, and in most cases a specific industrial context in which it will be important. When several related predictions are presented in series, they also communicate a rich picture of how developments will expand and co-evolve across different businesses and industrial contexts.

The predictions draw on evidence available today in businesses, universities and research organisations. Speculative technologies—those not already the subject of an active research or development program somewhere—have been excluded.

For clarity and simplicity, each prediction is written as if a factual statement about the future. Regardless of the presentation style, each prediction is a best estimation, on the evidence available, of future outcomes. Many assumptions—about the pace of technology development, commercial value, social acceptance and rate of deployment—lie behind each, and the real outcomes will always vary in scale, detail and timing. The predictions will be updated annually based on the latest developments and thinking.

BUSINESS THEMES

A significant difference in this report is its organisation of predictions around themes that are common to all businesses, with industry-specific examples scattered throughout each theme. The usual method is to organise everything by industry—publishing, insurance, banking and so on—but this is too restrictive because it tends to automatically narrow the focus to products and services that characterise each industry, and discourages readers from exploring many different contexts. Such designs are not ideal for fostering innovation when most of the best business innovations (the ones others are not already thinking about) come from crossing traditional boundaries and borrowing novel ideas from elsewhere. The business themes approach also allows important ground to be covered in ‘back office’ themes such as asset management and staff retention, topics that are usually ignored in industry-centric reports.

TECHNOLOGY THEMES

To build up a logical, step by step picture of the technology trends, I have begun Part I by detailing more fundamental developments in digital information, computer hardware, software and networks, before moving on to ‘composite’ developments that have elements of all these things. Of course, information technology is never really that tidy. Network improvements, for example, are also driven by improvements in chip production and smarter compression software, and the boundary between hardware and software is fuzzier than it first appears (firmware, after all, is only software encoded in silicon). In keeping with the business focus of this report, therefore, some compromise has been made on categorisation in order to keep things simple and readable.

BROAD ASSUMPTIONS

The following assumptions, distilled from more than a decade of research into the adoption of information technologies by businesses, have been applied in preparing this report.

Organisational and technological change is coevolutionary. Organisations tend to adopt technologies and adapt business processes incrementally, in a mutually interdependent fashion.
Adoption of new technologies is driven from the bottom up at least as much as it is driven from the top down. Very often, new technologies arrive in organisations in an unplanned fashion, brought in by individual departments or workers. Similarly, top down introduction is no guarantee of adoption and frequently fails when front line workers resist change.
Social factors such as trust, history, politics and power are inevitably critical in determining when, where and how quickly a technology is adopted. Technological availability and cost are often incidental compared to these.
Regardless of rapid advances in information technology, there are many biological factors that remain constant and greatly influence adoption, including the need for a regular, minimum amount of sleep (a limit on 24×7 work practices), limits to how much information we can assimilate and act on, limits to the number of tasks we can juggle simultaneously, and the need to interact socially with others.
Demographic shifts will play an important role in determining adoption. As more people enter the workforce that have interacted with computers their entire lives, expectations will change accordingly.
Global warming and environmental sustainability issues are real, growing and significant. They will influence all economies and all types of business activity.
Information technologies that remove complexity, make life simpler or eliminate business processes are always highly valued. Conversely, added complexity acts as a strong inhibitor to adoption. Successful new interface technologies, for example, will always simplify human-computer interaction and be easy to learn.
Technological inertia—the difficulty of abandoning technological solutions where large investments have already been made financially, politically and organisationally—is a strong inhibitor of adoption of new technologies.
Adoption of new technologies tends to follow a progression, with early adoption in contexts where perceived value and available budgets are highest. Defense and healthcare, therefore, often act as leading indicators for other sectors. A similar progression occurs across departments within organisations. Adoption broadens as technologies fall in price and become proven known quantities.
Wherever information technologies are associated with exponential growth we can expect dramatic implications for business, and wherever significant new pools of digital information are created we can expect new business opportunities to follow.

SOURCES

The primary data sources used for this report are recorded interviews with computer scientists, IT practitioners, researchers, business executives, policy-makers and technology leaders conducted by the author in the 2005-2007 period.

Secondary sources include academic journals, conference proceedings, websites and news articles, and are comprehensively referenced throughout the document.

DISCLAIMERS

While the intention in this report is to ground predictions as far as possible on observations of real research and real business developments, no one knows the future with certainty and there is no science for making predictions. Any attempt to consider the future necessarily involves subjective interpretations of many intersecting variables, and the sheer complexity of social, political, organisational and economic forces creates ample scope for error.

Sources used in preparing this report are believed to be reliable, but their accuracy cannot be guaranteed, and new developments and continuous change mean that statements contained within may no longer be accurate. Managers should use multiple sources to inform decisions. No responsibility is taken for business decisions made using this report as an input.

COPYRIGHT

17.4 Infrastructure and national security

JM — Thu, 17 Sep 2009 14:56:15 +0000

Business security will increasingly overlap with national security. Physical and cyber attacks on civilian infrastructure, including banks, communications, electricity and water utilities, will increase in frequency.[i]

2012 Security staff at water and electricity facilities routinely monitor, on a single console, the precise location of all visitors at all times.

2014 Airports routinely use machines that measure facial expressions, body language and respiration rate to detect stress and nervous signs.

2017 20 percent of the US electricity grid is equipped with enough sensors, actuators and smart software to rapidly rerouting power delivery and ‘self heal’ during disruptions and adverse events.

Businesses and governments will increasingly collaborate on threat detection and response, and governments will broaden regulations for compulsory information sharing.

2012 Electricity, water, and telecommunications companies routinely share, and co?fund, surveillance and network monitoring capabilities with governments.

2015 Selected businesses (e.g., airport corporations, chemical refineries, hazardous goods transport services, etc) are given the capability to directly broadcast public safety alerts to handsets, via the same systems used by emergency services.

2017 All types of businesses routinely share the live video feeds from their premises with national security agencies.

2018 In the top 100 world cities, more than 95 percent of all activity undertaken by people outside of their own households is digitally recorded by government, business or privately owned cameras.[ii]

National security agencies will consistently push the boundaries for applying information technology to threat detection.

2010 National security agencies in more than 50 countries routinely generate risk profiles on individuals using software to mine all the public ‘footprints’ they leave behind (especially associations and connections with other people) on the Internet.[iii]

2016 National security agencies routinely tag persons of interest and continuously track their personal location, 24 hours a day, for up to 3 years.

2025 National security agencies routinely scan for incriminating memory codes when interviewing suspected terrorists.[iv]

[i] The magnitude of these threats was demonstrated in alarming fashion in coordinated denial of service attacks made across Estonia in 2007, and also by China’s 2007 cyber-espionage activities. See Landler, M and Markoff, J 2007, ‘Digital Fears Emerge After Data Siege in Estonia’, The New York Times, May 29, http://www.nytimes.com/2007/05/29/technology/29estonia.html.

Jackson, P 2007, ‘The cyber raiders hitting Estonia’, BBC News, 17 May, http://news.bbc.co.uk/2/hi/europe/6665195.stm.

Greenemeier, L 2007, ‘China’s Cyber Attacks Signal New Battlefield Is Online’, Scientific American, September 18, http://www.sciam.com/article.cfm?chanID=sa003&articleID=1A9C210F-E7F2-99DF-3C85F17B1680980D&ref=rss).

[ii] London is perhaps the most ‘advanced’ city in this respect, but all other global cities will follow rapidly. In 2007, observers estimated there were at least 5 million CCTV cameras in the United Kingdom, or one for every 12 residents. London’s Metropolitan Police Service managed approximately 30,000 camera feeds and was collaborating with other operators of camera networks, such as Transport for London, to expand its reach. See Williamson, J 2007, ‘The London Eyes’, Security Products, November 9, http://www.secprodonline.com/articles/52751/.

One area where private cameras will proliferate will be on motor vehicles. Within the forecast horizon every new vehicle will be equipped with continuously running cameras. Networked in-car camera installations were apparently already being offered as an option by Toyota in 2007, for antitheft purposes. See Blass, E 2005, ‘Japanese Toyotas equipped with networked anti-theft cameras’, Engadget, September 5, http://www.engadget.com/2005/09/05/japanese-toyotas-equipped-with-networked-anti-theft-cameras/.

[iii] The US government is already using automated ‘risk scoring’ for potential terrorists in its System to Assess Risk (STAR), which grew out of the now discontinued Multistate Anti-Terrorism Information Exchange (MATRIX) program and Total Information Awareness (TIA) programs. STAR scoring is based on both internal and external data inputs. Despite strident criticism of this type of monitoring within the United States, there are, of course, a great many existent government programs that mine and cross-correlate all information owned by all departments in a national government. A recent example is the Risk Assessment and Horizon Scanning system or RAHS, which was launched by the Singapore government in March 2007. These programs will multiply rapidly, will increasingly incorporate the mining of public data sets, and will increasingly distil complex data inputs into simple ‘risk scoring’ outputs. See:

Nakashima, E 2007 ‘FBI Plans Initiative To Profile Terrorists, Washington Post , July 11, p-A08, http://www.washingtonpost.com/wp-dyn/content/article/2007/07/10/AR2007071001871.html

Letter from the US Department of Justice to Patrick J. Leahy, Chairman, Committee on the Judiciary, United States Senate, July 9, 2007, via the Electronic Privacy Information Center (EPIC), http://epic.org/privacy/fusion/doj-dataming.pdf

Weinberger, S 2007, ‘Son of TIA: Pentagon Surveillance System Is Reborn in Asia’, Wired.com, http://www.wired.com/politics/onlinerights/news/2007/03/SINGAPORE

[iv] Early but solid science is emerging to show that selected memories can be ‘read’ from mammalian brains, based on analysing patterns of activity in groups of neurons. The fidelity of the reading is enough to confirm experience of specific events of the emotionally charged, episodic type (such as being in an earthquake, or perhaps witnessing a large explosion). Information technology and further advances in the relevant neuroscience will undoubtedly improve fidelity over time. See Tsien, J 2007, ‘The Memory Code’, Scientific American, June 17, http://www.sciam.com/article.cfm?articleID=2B01392B-E7F2-99DF-33EA093AFDA271B1.

17.3 Fraud detection

JM — Thu, 17 Sep 2009 14:54:28 +0000

Fraud will be reduced through improvements in authentication infrastructure (Section 11.1) and also through more effective automated detection. Detection techniques will be applied to more types of information and more types of activity.

2010 20 percent of insurance companies analyse the speech of claimants for stress, and display real-time risk indicators to operators in claims processing centres.[i]

2012 Supermarket chains routinely achieve 10 percent year-on-year reductions in stock shrinkage through in-store video analytics [ii]

2012 Automated conflict of interest detection (by mining both internal and online social network information) is routinely used during legal disputes, company acquisitions and hiring procedures.

2013 Auto insurance companies routinely use software to harvest names from call centre conversations and screen for social connections between claimants, passengers, witnesses and company employees.

Fraud detection will increasingly combine information from multiple organisations.

2015 Large banks, retailers and law enforcement agencies routinely pool their data assets to conduct fraud detection analysis as a single unified activity.

[i] Leading UK insurers have been doing this for about 2 years, according to AVS, which provides a commercial voice risk analysis solution (www.digilog.com). The key is to use such technology to discourage fraud from happening in the first place, rather than to catch customers out. Where insurance companies combine sophisticated fraud detection with a sympathetic and positive engagement of customers (e.g. by using it to lower premiums), the financial benefit from both reduced loss and increased competitiveness will be considerable.

[ii] While almost all retailers have closed-circuit television systems in place today especially for security and loss prevention purposes, these are almost universally monitored by people, and monitoring is patchy, incomplete, and sometimes totally absent. In 2007, more than a fifth of US retailers reported that their camera feeds were really not monitored at all. The next few years will see a steep rise in the application of software tools to analyse the feeds from these systems for both in store marketing intelligence (Section 9.1) and security. Intellivid (www.intellivid.com) is an example of a company that provides in-store intelligence solutions, using analysis of video feeds, for loss prevention. Its products were apparently being used by four national US retail chains, and being piloted by four others, as at November 2007. See Adams, S 2007, ‘Boston-area firm offers video intelligence to merchants’, The Patriot Ledger, November 17, http://ledger.southofboston.com/articles/2007/11/17/business/biz02.txt

Sobalvarro, P 2007 ‘Retail video analysis on the rise’, Security Technology & Design, September, page 34.

17.2 Securing information and documents

JM — Thu, 17 Sep 2009 14:52:27 +0000

Businesses will become better at blending social, procedural, organisational and technological measures to protect customer information, driven especially by wider appreciation of the role of human weaknesses in security exposures.[i] Compartmentalisation will become an important strategy as organisations recognise that, as long as information is accessed by people, security cannot be completely guaranteed.[ii]

2009 Leading healthcare call centres use software to verify the identity of callers (by checking voiceprints and asking questions) and pass only first names to operators to preserve privacy.

2010 US, UK, and Australian governments pursue “federated” strategies for storing citizen records, deliberately splitting information across many departments and allowing parts of records to be combined to fulfil specific processes.[iii]

2014 35 percent of Fortune 500 businesses use privacy preserving technologies to ‘anonymise’ customer records when employees retrieve them.

2017 In the banking and finance sector, the number of unauthorised breaches of customer information has remained steady over five years, but average financial loss per customer has been reduced by 40 percent.

In additional to the usual information security mechanisms, businesses will increasingly employ additional layers of technological oversight to reduce the risk of accidental exposure.

2013 Businesses routinely employ software to scan for customer information in emails and alert employees when their actions may breach company privacy guidelines.

2016 In leading organisations, all information stored on customers, in any form, is ‘tagged’ with a privacy rating, and software is used to prevent retrieval, copying or sharing if a rating will be breached.

2019 Businesses routinely employ systems that interrogate the privacy rights policies of trading partners, and secure a digital guarantee of compliance, before allowing customer information to be transmitted from one to another.[iv]

Customer acceptance of personal information gathering and sharing will increase over time, but failure to secure this information will remain unacceptable.[v]

2013 Health services companies routinely offer customers online access to review, correct and delete the personal information that has been stored on them, and to view reports on how it has been accessed.

2016 Only 5 percent of adults use online anonymity brokers to hide their identity while shopping and browsing online.

2018 A DNA sample is stored, and available to government authorities for information analysis, for over 95 percent of US, UK and Australian citizens.

To help prevent valuable or sensitive commercial documents falling into the wrong hands, companies will progressively roll out sophisticated monitoring and distribution controls.[vi] Legal firms and government agencies will be consistent leaders.

2009 News media companies routinely watermark online video and audio content to track authorised and unauthorised distribution.[vii]

2010 Lab workers in pharmaceutical and biomedical research companies routinely use identity cards to digitally timestamp their work, creating auditable trails for evidence in future patent applications.[viii]

2011 Lawyers in large firms routinely set ‘access permissions’ every time they create a document.[ix]

2012 Consulting companies routinely imbed “fingerprints” in strategic client reports to keep track of internal distribution.

2014 Supervisors in national security agencies routinely track, from a single console, the distribution, display and printing of every electronic document by every employee.

2018 It is no longer possible to eavesdrop on sensitive information transfers between banks without being detected.[x]

[i] Most major security breaches do not involve tampering with systems or software: they happen because of human fallibility. Laptops are lost, files are left in cars and people are tricked into divulging passwords. The fact that the weakest links are consistently human and procedural was especially impressed upon me by conversations with cyber hacker Kevin Mitnick in 2005. In just about every case where he breached the defences of organisations he used social engineering techniques, not technical expertise.

In 2007, a considerable source of information loss was employees leaving laptops behind on the seats of taxicabs. Another spectacular demonstration of information exposure through human error was given by the UK government when the Revenue & Customs department lost the personal records of 25 million individuals, including dates of birth, addresses, bank details and insurance details, because a disc was placed in the internal post to another government office.

By 2018, the security technologies adopted by business will have improved considerably (laptops will be routinely encrypted, employees will routinely use multifactor authentication with tokens and biometrics (such as thumbprints) complementing passwords. Human weakness and forgetfulness, however, will remain a constant.

Wintour, P 2007 ‘Lost in the post – 25 million at risk after data discs go missing’, The Guardian, November 21, http://politics.guardian.co.uk/economics/story/0,,2214460,00.html

See also Bruce Schneier’s blog http://www.schneier.com/index.html for more insights on this subject. Bruce is an outstanding thought leader on information technology security.

[ii] No business can eliminate information exposures altogether. Like water, bits flow easily from one place to another along any electronic path available. Completely preventing unauthorised flows is impossible, and leaders will put as much effort into containing the potential size of exposures, through information compartmentalisation, comprehensive response procedures, etc, as they do on preventing the exposures.

[iii] This predicts an abandonment of existing strategies involving a single large central repository for citizen information. In 2007, poorly architected schemes for managing citizen information were doing as much to increase the risk of abuse as to reduce them.

[iv] Dr Renato Iannella, Principal Scientist at NICTA (http://nicta.com.au/) helped me understand where privacy rights management may take us, based on his early work on this with the World Wide Web Consortium (www.w3c.org), in an interview on 1 November 2007.

[v] Privacy expectations are shifting all the time, and will continue to shift. There is a strong link between the use of computers by young people who are more accepting of personal information being placed in the public domain. For businesspeople, however, this trend is best interpreted as a transaction: people are trading away more information for what they perceive to be more benefit (e.g. more convenient services, time savings, better quality of healthcare, improved national security, social capital). Customers expect businesses and governments to deliver on their side of this transaction, and not to abuse the privilege. In the healthcare sector, considerable tension will come from the conflicting goals of sharing patient information to maximise healthcare effectiveness, and the desire by individuals to compartmentalise information to keep it from insurance companies.

[vi] Implementations of so called ‘enterprise digital rights management’ were still few and far between in 2007 because they have been cumbersome to implement and lack interoperability, making it difficult for trading partners to share documents in a controlled fashion. The statement assumes steady progress in imbedding digital rights management in business software by Microsoft and others, until it is part of the standard fabric of IT infrastructure installed in large businesses. There are plenty of uncertainties here, but large businesses are seeking more control of distribution of internal documents and S2 expects this demand will be met.

[vii] The application of digital rights will bring continuous challenges to media companies and online publishers as they try to find the best balance between control and accessibility. For the most part this balance represents uncharted territory. Companies that achieve the right balance (as, for example, Apple did with iTunes) will enjoy lucrative revenue streams, while those that get it wrong will cost themselves their audience.

In digital TV, programming accessibility is likely to become hierarchical, with a large percentage of content having no digital rights management controls and a small percentage of content having very strict controls with timeouts for viewing and recording. Major studios, however, will continue to lock-in intellectual property wherever they can, and a healthy pirate industry will develop around hacking and breaking digital rights management technology in digital TV.

Another challenge will be interoperability. Digital TV providers will need a technological framework that allows content to be viewed on any device or software platform selected by the viewer.

[viii] Such an implementation has already been done at Pfizer. See McLaughlin, L 2007, ‘Identity Crisis: Pfizer’s Fix’, CIO, October 2, http://www.cio.com.au/index.php?id=437327295&rid=-154.

[ix] i.e. they will set permissions to determine who can henceforth read, print and forward the document.

[x] This prediction is based on the use of quantum cryptography made to work over longer ranges. Wide scale application of quantum cryptography in the business community is not anticipated during the forecast period, but banks and governments will apply it to sensitive communications over optical links. For more on how quantum cryptography works, see Stix, G 2005, ‘Best-Kept Secrets’, Scientific American, January, http://www.sciam.com/article.cfm?id=000479CD-F58C-11BE-AD0683414B7F0000&page=3.

17.1 Safety

JM — Thu, 17 Sep 2009 14:50:27 +0000

Led by the defence sector, unmanned, optionally manned and remote-controlled vehicles will be much more widely used to eliminate human involvement from high-risk activities.

2011 Unmanned vehicles are routinely used for placing explosive charges in underground mining.

2015 Recovery of broken down vehicles on busy multilane freeways is routinely conducted by autonomous vehicles.

2017 Emergency services routinely deploy teams of semi-autonomous robots for fighting bushfires.

2019 Search and rescue organisations routinely deploy fully autonomous teams of robots to locate and assist casualties in collapsed buildings.[i]

2020 90 percent of all aircraft, and 20 percent of all vehicles deployed by US military services are unmanned, optionally manned or remotely controlled.[ii]

Continuous supervision will find its way into all aspects of workplace safety. All employees will be precisely locatable in the workplace and in the field.[iii]

2010 Personnel on board merchant vessels routinely wear wireless tags so watch officers are aware of their precise location at all times.

2012 On large building sites, construction companies routinely track the location of all personnel onsite via GPS hardhats.

2014 Aircraft service technicians record continuous video as they work. Archived footage is routinely reviewed to track down causes of problems and to improve procedures.

Video supervision will progress from the high risk occupations (defense, police, rescue) to occasional risk occupations (parking inspectors, construction workers) and finally into all types of occupations.

There will be a shift from area monitoring to personal monitoring, with wearable cameras running continuously through the workday. This will be increasingly augmented by computers that automatically trigger when risks are detected, reducing response times to dangerous situations.[iv]

2010 Officers in leading police departments automatically trigger, through voice stress detection, live audio, video and location streaming to a remote supervisor.[v]

2014 Heavy equipment operators on building sites routinely wear sensors that detect fatigue and automatically trigger safety systems.

2018 All kinds of office workers subscribe to personal safety services where live audio, video and location information is streamed to operators at the press of a button.

Public safety communications will be far more precisely targeted, improving effectiveness.

2012 Emergency services routinely broadcast alerts directly to handsets located in areas about to be hit by storms, fires, tsunami, flood and chemical spills.

[i] See the Robocup Rescue Competition (http://www.rescuesystem.org/robocuprescue/) for examples of prototype robots that have already been created in the journey towards this goal. Autonomous navigation of rubble and debris is one of the principal challenges. Remote human control limits the flexibility, range and speed of action for such devices.

[ii] The United States has a very aggressive strategy to deploy autonomous vehicles in all types of military roles. The variety and complexity of mission roles, situational variables and environmental factors (e.g. forest versus urban warfare) encountered by ground vehicles will ensure that replacing manned vehicles in this context will take much longer than aircraft.

[iii] All mobile phones can already be geolocated through base-station triangulation and signal-time analysis, but not necessarily to a high degree of precision. The E911 regulations in the United States mandated a capability to locate any wireless handset within 50-100 metres (http://www.fcc.gov/pshs/services/911-services/enhanced911/Welcome.html). As personal GPS becomes universal, however, everyone will be locatable to within a few metres.

[iv] In much the same way that new automated swimming pool warning systems work, alerting lifeguards instantly when they detect swimmers getting into difficulties.

[v] In the latest police vehicle designs demonstrated in 2007, a duress button allowed police officers to trigger rich audio and video remote monitoring, including when they were away from the car. Such a button will be retained, but will become unnecessary. Withers, S 2007, ‘Most technically advanced police car revealed’, IT Wire, August 14, http://www.itwire.com/index.php?option=com_content&task=view&id=14004&Itemid=1054.

16.4 Other regulations

JM — Thu, 17 Sep 2009 14:48:20 +0000

Governments will progressively increase the amount of regulation applicable to content (political activism, extremism, sedition, defamation, adult content, spam, etc) on the Internet. This will remain an immensely difficult area, and many regulations will be ineffective and poorly implemented.[i] Multiple regulatory approaches will, for the most part, increase the complexity of online commercial activity.

2010 Businesses are routinely required by law to inform customers when breaches of private data occur.

2013 Governments are no longer able to regulate limits on media ownership.[ii]

2014 Marketing departments routinely use online services that automatically filter outbound communications to match regulatory requirements in different jurisdictions.

Initiatives that successively standardise online regulations across multiple jurisdictions will be enormously valuable to businesses.[iii]

2013 A global cyber-security code is agreed, legally obliging Internet service providers to co-operate in thwarting international denial of service attacks and other common online crimes.[iv]

2018 Consistent definitions, backed up by applicable local legislation, are agreed across the US, UK, Australia and EU for what constitutes acceptable online content.[v]

Government regulation will increasingly extend beyond the boundaries of the network to stipulate minimum IT capabilities for critical organisations and professions.

2010 Healthcare practitioners are routinely required, as a condition of practice, to maintain a minimum computing capability.

2011 Law firms are routinely required, as a condition of practice, to maintain a minimum computing capability.[vi]

2013 Banking services are required to comply with government mandated authentication standards.

[i] Privacy is a good example. Privacy regulation will continue to develop reactively, driven by sporadic exposures and public outcries, and will lag industry best practice by at least two years. Nevertheless, businesses can expect to find a growing body of law applicable to how private information can be stored, secured, maintained and shared and, once again, the laws will vary across jurisdictions.

[ii] As television, print and radio move to IP-based delivery, spectrum licensing will cease to be the key determinant of who reaches what audiences. A further consequence is that all news media companies will effectively find themselves competing for audiences and advertisers in a single global commons. The effects of the transition are already visible. In 2007, for example, Nielsen Netratings reported that the websites of UK newspapers The Guardian, The Times, The Independent and the Daily Mail had more American and British readers and this is shaping choices by advertisers, and editors. See Blakely, R 2007, ‘Newspaper ad execs must target wealth of online readers overseas’, Times Online, August 3, http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2189101.ece).

[iii] International regulatory alignment here is likely to coalesce around groups of countries based on ideological and religious commonalities instead of common trade interests. Most multinational companies will follow a ‘lowest common denominator strategy’ by broadly complying with the most stringent set of regulations in the markets they are operating in, limiting exceptions to only a few, very large markets.

[iv] A global cybersecurity legal code would cover definitions, obligations and responses for common online crimes. There is an urgent need for such an agreement, and frameworks already exist, but acceptance remained incomplete in 2007. The increase in Internet related dependencies, and associated risks, will force the pace. See The Economist, 2007, ‘Newly nasty’, May 24, http://www.economist.com/displaystory.cfm?story_id=9228757

[v] It will take much longer, perhaps another decade, before a globally unified set of protocols is achieved for content on the Internet, and businesses no longer have to worry about multiple sets of regulations. That outcome is dependent on achieving a compromise across many significantly different ideologies and cultures. It is interesting to note, however, that the Internet will itself be the dominant force in reducing these differences and making such a compromise achievable.

During this journey there is also a small, but real possibility, that the desire to apply strong regulation to online content in countries such as China will see the Internet temporarily fragment, with different bodies taking over Internet governance in different geographies. This would force multinational companies to run parallel online businesses, and would significantly increase the complexity of electronic trade.

[vi] New requirements will also apply to judges, who will need to maintain a minimum standard of knowledge on information technologies in order to know, for example, what constitutes a reasonable discovery request. For further insights into e-discovery, see The Economist 2007, ‘Of bytes and briefs’, May 17, http://www.economist.com/displaystory.cfm?story_id=9200894.

16.3 Compliance reporting

JM — Thu, 17 Sep 2009 14:15:28 +0000

Businesses will report more types of information, more frequently, to governments, customers and shareholders. The detail and frequency of sustainability reporting in particular will increase for all businesses.[i]

2011 Supermarkets routinely display carbon footprint information to customers for 30 percent of the products on their shelves.[ii]

2012 Product buyers in supermarket chains routinely incorporate supplier carbon footprints into their buying strategy.

2013 Large businesses routinely report environmental footprint metrics to regulators every month.

2018 Business in energy intensive industries (steel, heavy manufacturing, power generation) upload environmental footprint metrics to regulators every day.

Individual compliance reporting mechanisms will become significantly more efficient as governments move to take all inputs electronically, and progressively standardise the data and format requirements. This will both reduce labour costs and improve the timeliness of reporting. Standardised reporting initiatives will expand slowly across departmental, city, state, and national boundaries. International alignment will broadly align with trading alliances.

2009 Global 500 companies routinely deal with 30 different sustainability reporting schemes.

2012 Businesses in the UK and Australia use a single uniform format for submitting financial information to all government agencies and regulators that they deal with.[iii]

2013 Energy and telecommunications businesses reduce their annual costs, for preparing and submitting information to government pricing reviews, by 40 percent in three years.

2015 Supermarkets follow government mandated standards for how carbon footprint information is measured and displayed on shelves.

2015 US businesses enjoy standardised sustainability reporting requirements across all Federal and State jurisdictions.

Where governments implement such changes relatively quickly, it will translate into increased competitiveness for businesses in their jurisdictions.[iv] These improvements will only partly offset the addition of many new reporting requirements, however, and the overall compliance burden will increase for most businesses.[v]

[i] Governments will steadily raise the bar for mandatory reporting of sustainability metrics. In the near term, strong regulations will apply only to high energy users and emitters (such as large manufacturers), but we can expect the thresholds to move, increasing the compliance burden on midsize, and then small businesses, including service-based businesses. Regardless of regulatory requirements, however, all companies will be driven to monitor and report sustainability metrics more openly to customers and shareholders.

The Carbon Disclosure Project (www.cdproject.net) demonstrates how large organisations are already voluntarily participating in the disclosure of sustainability metrics. Useful additional references on Australian reporting activities are the Australian Emissions Trading Forum (www.aetf.emcc.net.au) and National Greenhouse and Energy Reporting Bill 2007 (http://www.comlaw.gov.au/comlaw/Legislation/Bills1.nsf/0/75524E7A6B3EE9A9CA25733D0008B8FD?OpenDocument).

[ii] In 2007, Tesco announced that it would go down this path in the UK. In a speech given to invited stakeholders in January, Sir Terry Leahy stated that Tesco would search for a “universally accepted and commonly understood measure of the carbon footprint of every product we sell [spanning its] complete lifecycle from production, through distribution to consumption.” So that it customers could “compare their carbon footprint as easily as they can currently compare their price or their nutritional profile.”

Carbon labelling will proceed progressively in supermarkets, beginning with products in the standard shopping basket where there are big variations between suppliers. This sort of transparency to consumers will immediately force trading partners and importers to factor for environmental credentials when selecting who to buy from.

Key challenges include consistent ways of measuring carbon footprint and the granularity of information that can be collected consistently across many suppliers. Early labelling in will have low granularity (e.g. a five star rating system) but will contain steadily more detail, over time. Spatial browsers and location technologies such as RFID will greatly improve the visibility of energy use and emissions across supply chains. See:

Leahy, T 2007, ‘Tesco, Carbon and the Consumer’, Tesco, January 18, http://www.tesco.com/climatechange/speech.asp,

‘Carbon labelling Report on Roundtable, 3rd-4th May 2007’, St Anne’s College, University of Oxford, http://www.eci.ox.ac.uk/research/energy/downloads/carbonlabelling_roundtable.pdf

[iii] National government agencies in the UK, and also within Australia, should have completed the transition to standard, uniform formats for electronic reporting of financial business information by this time. In late 2007, Standard Business Reporting was being implemented in the Netherlands and Singapore, about to move into implementation in Australia, and at the business case stage in New Zealand and the UK. These initiatives are being led by Treasury and Taxation departments. The dominant technical standard being adopted is eXtensible Business Reporting Language or XBRL (www.xbrl.org), which will enable accounting software to automatically populate government forms that, once authorised, are electronically submitted to government.

A variety of documents on standardised electronic reporting progress are published regularly by the OECD (www.oecd.org). See also Australia’s Standard Business Reporting supporting documents at http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=1165.

[iv] The Solvency 2 regulations, for example, that are due to come into effect in the European Union in 2012, are likely to deliver simpler, more consistent and more automated regulations to insurers operating in the EU, translating directly into lower operating costs. See Jones, MA 2007, ‘EU: Solvency II – New Solvency Requirements introduced by the EU’, Issue 7, Lloyds, http://www.lloyds.com/compliancev7/article3.htm.

[v] Adding to the burden, large-scale adjustments to financial regulations (in a similar vein to the Sarbanes Oxley response to Enron, WorldCom, Tyco and Peregrine scandals in 2002) can be expected to disrupt the status quo every 5-8 years.