Forces that fuel the digital economy

Before the internet, organizations required brick-and-mortar stores or phone lines to conduct their businesses. The advent and accessibility of the internet created a critical category-formation time opportunity for organizations. Businesses started to use the internet mainly as a storefront or display in order to drive people to their brick-and-mortar stores. It was also used for advertising purposes.

Soon after this, businesses began adding the ability to purchase things online, and companies, such as Amazon, realized that they could capitalize on the economies-of-scale, product aggregation, consolidation, recommendation, and pricing optimization that an online store could provide. This was the very beginning of cloud and cloud-native applications. This is the first force that fueled the digital economy.

But what really accelerated the digital needs of businesses was the appearance of the second focus mobile devices, which connected even more people to the internet. More people now had a digital presence on the internet and businesses realized that these people were a new market that they could exploit. This new market required applications to scale to what people now call the internet scale. But paying for software licenses for this type of scalability was too expensive and prohibitive. This is where open source software, the third force that fueled the digital economy, came to the rescue. The power of the community accelerated the development of open source projects via crowdsourcing and open source collaboration. Anyone from anywhere in the globe could contribute to open source projects. Likewise, internet-scale companies, such as Amazon, Netflix, and Lyft, either use open source software or have created and contributed open source to the community.

Another benefit of open source software is its adoption of subscription-type support (for organizations that require external support for the software they run in production), which is significantly cheaper than software licensing. The growth of open source software fulfilled this need in the market, and companies such as Red Hat, purveyors of open source software, have succeeded in delivering enterprise-grade open source solutions.

As virtualization technologies matured and companies built and proved out internet-scale technologies and infrastructures, they realized that they could rent out these resources, such as compute and memory, to anybody. Consumption-based pricing made these resources even more accessible. Companies realized the value of saving costs, productivity, and speed-to-market of the cloud and started rushing to adopt this new model. Major companies such as Microsoft, Google, and Amazon all have cloud offerings.

IoT is the last and fourth force that is fueling the digital economy. Like the data generated by the digital presence of each person using the internet, IoT also generates large amounts of data that can be exploited to make sound business decisions. IoT demands internet-scale technologies and infrastructures that the cloud and big data technologies fulfill.

The convergence of these four different forces means that organizations have to adapt in the way they create and maintain business applications, thus affecting the speed at which they introduce innovation to their organizations. This is what is known as multi-speed IT, which we will discuss in more detail in the following section.