It Isnt the Net, Stupid—Its the Computers

 
 
By eweek  |  Posted 2001-06-04 Email Print this article Print
 
 
 
 
 
 
 

The internet mantra used to be "creating online businesses will disintermediate brick-and-mortars." Why pay for multiple middlemen, the thinking went.

The internet mantra used to be "creating online businesses will disintermediate brick-and-mortars." Why pay for multiple middlemen, the thinking went, when you can buy and sell goods and services directly, courtesy of the Internet?

Well, that line of thinking has proved true to some degree. The investment industry is one example. Some of the largest brokerages are seeing as much as two-thirds of their business coming directly from online users bypassing individual stockbrokers.

But looking at the Internet simply as a tool for disintermediation is looking at it as just a communication medium. That view ignores what is happening at either end of the communication pipe, where youll find computers—and lots of them. Add massive computing power to direct communication, and you get an opportunity for reintermediation. I dont mean merely putting middlemen back in the process but allowing them to combine existing goods and services with computing and communication power in a way that creates new products that wouldnt have been possible without the combined power of the Internet, PCs and large-scale computers.

Mutual funds are a reintermediation product invented some 75 years ago. Packaging the management and accounting for large, diversified portfolios that people could buy small shares in created this new product. There was a significant cost in creating it, but the consumer readily paid the management fees because of a mutual funds value as a diversified investment vehicle.

Now add the communication medium of the Internet, combine it with computing power at the consumer and producer ends, and it is possible to create other new products that, for example, provide the same kinds of management and accounting for large, diversified portfolios and bring them directly to the consumer without the intermediary mutual fund company.

Weve been working on this new type of product at FOLIOfn in the form of a product called FOLIO Investing, a personalized basket of stocks that consumers can change any time by adding or removing stocks or by modifying the dollar amount thats invested. Its a direct creation of product reintermediation requiring both the Internet and lots of computing power.

It isnt just the communications capability of the Internet that is driving new product development; it is the combined advances of low-cost/high-power PCs, massive servers and disk farms, as well as easy-to-use browser software, that provide the medium for new ideas to be turned into usable products. And that is why the Internet existed for almost 25 years before we started to see widespread use. It wasnt the Internet, stupid; it was the inter-computer-to-computer-net. And that is changing everything.

 
 
 
 
 
 
 
 
 
 
 

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