Unit 10: Thriving in a new economy

8th Semester

 Digital Economy

Digital economy refers to an economy that is based on digital computing technologies. The digital  economy is also sometimes called the Internet Economy, the New Economy, or Web Economy.

  • Internet economy is made up of companies directly generating all or some part of their revenues from Internet or Internet-related products and services
  • The confluence of two forces has created the Internet Economy- the Globalization of business and the Networking of information technology.
  • It is widely accepted that the growth of the digital economy has widespread impact on the whole economy.

Digital Economy – Components

Three main components of the ‘Digital Economy’ concept can be identified:

  • E-business infrastructure :-hardware, software, telecoms, networks, human capital, etc
  • E-business  :- how business is conducted, any process that an organization conducts over computer-mediated networks
  • E-commerce :- Transfer of goods physically after order is made ,–Involves payment of the goods too

The other components of digital economy
1. Government
Governments are an important component of the digital economy by virtue of their traditional role in providing primary funding for a country’s communications infrastructure. They also have an important role to play in sustaining infrastructure development and improving e-readiness.
2. Policy and Regulation
ICT or telecommunication policies are fundamental in the digital economy. A conducive business environment is necessary for firms to thrive and benefit from ICTs. This requires a transparent, open and competitive business framework; clear, independent rules of law that are applicable to all firms; mechanisms for the easy set up and dissolution of businesses; transparent, simple and accessible corporate regulation; and equal and stable legal treatment for national and cross-border transactions (OECD,
E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as businessto-business, business-to-consumer, consumer-to-consumer or consumer-tobusiness. The terms e-commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to transactional processes for online shopping.
Categories of e-commerce
As with traditional commerce, there are four principal categories of ecommerce: B2B, B2C, C2B and C2C.

  •  B2B (Business to Business) — This involves companies doing business with each other. One example is manufacturers selling to distributors and wholesalers selling to retailers.
  • • B2C (Business to Consumer) — B2C consists of businesses selling to the general public through shopping cart software, without needing any human interaction. This is what most people think of when they hear “e-commerce.” An example of this would-be Amazon.
  • C2B (Consumer to Business) — In C2B e-commerce, consumers post a project with a set budget online, and companies bid on the project. The consumer reviews the bids and selects the company.
  • C2C (Consumer to Consumer) — This takes place within online classified ads, forums or marketplaces where individuals can buy and sell their goods. Examples of this include Craigslist, eBay and Etsy.


Twelve theme of the new economy

1. Knowledge

  • knowledge is created by knowledge workers and by knowledge customers
  • Information Technology enables an economy based on knowledge
  • Rise of Artificial Intelligence (AI) and other knowledge technologies

2. Digitization

  • Information can be represented as either 1 or 0
  • Bits could be used to represent more and more types of information, such as graphs and photographs
  • Vast amounts of information can be squeezed or compressed and transmitted at the speed of light.

3. Virtualization

  • Physical things can be become virtual changing the metabolism of the economy
  • Virtual ballot box, Virtual bulletin board, Virtual business park, Virtual job, Virtual Reality ,virtual classrooms


  • The old corporation is being disaggregated
  • Replaced by dynamic molecules and clusters of individuals and entities that form the basis of economic activity
  • Mass becomes molecular (based on the individual) in all aspects of economic and social life
  • Mass media -> Molecular
  • Mass production -> Molecular

5. Integration / Internetworking

  • Integration molecules into clusters that network with others for the creation of wealth
  • Internetworked Enterprise
  • Style of networking from host computer

6. Disintermediation

  • Middleman functions between producers and consumers are being eliminated through digital networks; e-commerce
  • Changing the single pattern
  • For instance: Musicians and their producers won’t need recording companies, retail outlets, or broadcasters when their music becomes a database entry on the Net.

7. Convergence

  • Products of the convergence of the computing, communications, and content industries
  • Eg. Youtube –Content ,Computing ,–communications

8. Innovation

  • “Obsolete your own products”
  • For example; Microsoft technologist Ken Nickerson is proud to say that it was Microsoft (with Windows 95) that succeeded in making obsolete the best-selling software of all time, Microsoft’s own DOS.

9. Prosumption

  • Producers must create specific product that reflect the requirements and tastes of individual customers.
  • Consumers are involved in the actual production process
  • The gap between consumers and producers blurs
  • Mass production is replaced by mass customization

10. Immediacy

  • The new enterprise is a real time enterprise, which is continuously and immediately adjusting to changing business conditions through information immediacy
  • For instance;– Electronic Data Interchange (EDI) – linking computer systems between suppliers and their customers for purchase orders, invoices, billing, and record keeping, companies can save considerably over manual (non digital) methods

11. Globalization

  • Driving the extension of technology
  • To meet the demand of global consumers
  • Global business need to be able to link with customers, suppliers, employees, and partners throughout the world
  • Boundary-less firms, global organization etc.

12. Discordance

  • Unpredicted social issues such as; privacy, access, quality of work life, quality of life etc. are beginning to arise
  • The nature of work and the requirements of the workforce in the digital economy are fundamentally different
  • The concept of labor is undergoing a radical redefinition
  • The new economy is bringing high-paid, high-value jobs, but there is little job mobility between old and new.

The ten technology shift

Shift1: From Analog to Digital

  • The existing analog signals of the old economy has shifted to the digital signal of the new economy.
  • Digitization not only improves quality and enables interactivity, it provides the foundation for a whole new world of computer and networked based applications as well as enabling fundamentally new approaches to find and manage information

Shift2: From traditional semi-conductor to microprocessor technology 

  • High performances processing for the high-performance organization
  • Microprocessor has inherently shown better performance than the traditional semi-conductor technology •
  • Enables to operate powerful applications in an organization

Shift3: From host to client/server computing

  • Network centric computing for the internet worked enterprise
  • Client/server computing for the dynamic client/customer service organization
  • Apart from the reduction of IT costs using client/server computing also helps to direct the enterprise to be responsive .
  • Also, it facilitates to change server structure behind the client without affecting the client and vice versa.

Shift4: From garden path BW to information gateway

  • New economy is enhanced with broadband communication for the networked economy .
  • Many companies are competing for the price of building and operating the carriage .
  • Carriage is the physical structure of the highway composed of networks, software and switching device

Shift5: From dumb access device to information appliance 

  • TV is the one of the dumbest appliance ranking on the home appliance .
  • In new economy, the dumb access device is shifted to information appliance .
  • Those information appliances are highly used for different purpose like: business application, education, entertainment, home shopping video conferencing

Shift6: From separate data, text, voice and image to multimedia

  •  In old economy static media like data, text, voice and image are communicated independently in an isolated manner • In new economy, the concept of multimedia has emerged
  • With the real-time animation, the users can fully interact with the moving environment
  • Multimedia also enables the genuine interactivity, 3D navigation and photorealism.

Shift7: From proprietary to open system

  • Open system for an open world
  • Open system is characterized by interoperability and portability

Shift8: From dumb to intelligent network 

  • With the emergence of new economy there has been the shift of network from dumb to intelligent.
  • Hypermedia, hypertext, hotlinks, knowbots /softbots, etc are the dominant in network in new economy

Shift9: From craft to object computing

  • Rapidly deployable software for the rapidly changing world
  • Because of the old approach there is the limit in reusability of the software.
  • Thus in new economy object computing has emerged, which rather than creating large, complex, tightly intertwined software programs, programmers creates the chunks of software called objects.

Shift10: From GUIs to MUIs, MOOs, MUD, MOLEs, AVATARs and VRs

  • New collaborative environment for a new economy
  • Multi-user interface typically refers to an operating system that allows concurrent access by multiple users on the system. For example, on UNIX operating systems, two users can log in to the system at the same time.
  • Multi-user domain (MUD), object oriented (MOO) is a virtual reality system in which several users are connected at one time. Users from around the world log in to use this object-oriented database system, which is stored on a remote server.
  • MOOs are interactive systems that can be used to develop educational and other collaborative systems (software). These multi-user systems are programmable and can be accessed over a network
  • A multi-user dungeon (MUD) is both a style of role-playing game. MUD was modeled after earlier text-based adventure games and became a popular game to play over Telnet, an early commercial Internet.
  • Multi-user dungeons are sometimes referred to as multi-user dimensions or multi-user domains.
  • The definition of an avatar is something visual used to represent non-visual concepts or ideas, or is an image that is used to represent a person in the virtual world of the Internet and computers.
  • An example of an avatar is an icon you use to represent you on an Internet forum.
  • Virtual reality is an artificial environment that is created with software and presented to the user in such a way that the user suspends belief and accepts it as a real environment. On a computer, virtual reality is primarily experienced through two of the five senses: sight and sound.


The Internet Economy and its indicators

  • Layer 4: Internet Commerce
  • Layer 3: Internet Intermediary
  • Layer 2: Internet and Network Applications Infrastructure
  • Layer 1: Internet Infrastructure
  • Layers 1 and 2 are infrastructural and 3 and 4 are economic activity oriented

Layer 1: Internet Infrastructure
Companies that manufacture or provide products and services that make up the Internet network infrastructure includes:

  • Internet backbone providers
  • Internet service providers
  • Networking hardware and software companies
  • PC and Server manufacturers

Layer 2: Internet and Network Applications
Infrastructure Companies that manufacture or provide products and services necessary to carry out all activities in the digital market includes:

  • Internet consultants
  • Web server software and other Internet applications
  • Multimedia applications
  • Web development software
  • Search engine software
  • Online training

Layer 3: Internet Intermediary
Companies that increase the efficiency of electronic markets by facilitating the meeting and interaction of buyers and sellers via the World Wide Web and Internet includes:

  • Market makers in vertical industries
  • Online travel agents
  • Online brokerages
  • Content aggregators
  • Portals/Content providers
  • Internet ad brokers

Layer 4: Internet Commerce
Companies that generate product and service sales to consumers or businesses over the Internet and World Wide Web.

  • Online product sales
  • Fee/subscription-based companies
  • Online advertising
  • Online travel providers