Impact of information technology on society in the new century

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In recent decades there has been a revolution in information technology and communication, and there is every indication that technological progress and the use of information technology will continue at an accelerated pace. The dramatic increase in the capability and use of new information technologies has been accompanied and supported by falling communications costs due to both technological advancements and increased competition. According to Moore's Law, the processing power of microchips doubles every 18 months. These developments offer many important opportunities, but also major challenges. Today, innovations in information technology have far-reaching implications in many areas of society, and policymakers are taking action in the areas of economic productivity, intellectual property rights, protection of privacy and affordability, and access to information. Decisions taken now will have lasting effects and consideration should be given to their social and economic impact.

One of the most important results of the advancement of information technology is probably electronic commerce over the Internet, a new way of doing business. Although it is only a few years old, it can radically change economic activities and the social environment. It is already affecting sectors as large as communications, finance and retail and could expand into areas such as education and health services. It is about the seamless application of information and communication technology across the entire value chain of a business that is conducted electronically.

The effects of information technology and electronic commerce on business models, trade, market structure, the workplace, the labor market, education, private life and society as a whole.

1. Business models, trading and market structure

An important way information technology affects work is by reducing the importance of distance. In many industries, the geographic distribution of work is changing significantly. For example, some software companies have found that they can beat the tight local market for software engineers by sending projects to India or other countries where salaries are much lower. In addition, these arrangements can take advantage of time differences to work on critical projects almost 24 hours a day. Companies can outsource production to other countries and rely on telecommunications to keep marketing, R&D and distribution teams in close contact with manufacturing groups. Technology can thus enable a finer division of labor between countries, which in turn affects the relative demand for different skills in each country. Technology makes it possible to decouple different types of work and employment. Firms have more freedom to locate their economic activities, leading to increased competition between regions in markets for infrastructure, labor, capital and other resources. It also opens the door to regulatory arbitrage: companies can increasingly choose which (tax) regulations apply.

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