Enterprise networks: how to overcome the obstacles to their effective diffusion, IST networking session 22.11.2006 14-15.30 Helsinki

The scale free system

Ville Saarikoski TIEKEThe Finnish Information Society Development Centre

Time to change our Paradigm – we need a new network* perspective

• time to think from a new perspective – the network perspective. Old thinking leads to a cul de sac. New thinking will enable us to see bottle necks and resolve them.

• The structure of Scientific Revolution (Kuhn 1962) - “Scientific knowledge does not accumulate in a linear fashion, but science also contains discontinuities, contradictory and revolutionary phases”

- “The longer a person has success with a particular paradigm, the harder it is to let it go, when it no longer applies”

* The presenter has a background in telecom and thus there are less examples of service based networks. The network perspective sees networks on all layers from services to physical networks. The need to separate between infrastucture and service can also be questioned.

SME’s and stories of networking

• Networking stories 1 (business perspective):– A focus on core competencies leads to outsourcing– The subcontractor seeks to limit dependency on one customer

and seeks for new customers– As the subcontractor grows it in turn creates a focus on core

competencies and outsources

=> In this way a Web is spun• Networking stories 2 (resouce based view)• Networking stories 3 (core competence based)• Networking stories 4 (process approach)

SME’s and stories of networking

• Networking stories 5 (technology based) – The Helsinki Chamber of Commerce in a study on the

information system needs of SME’s in an e-environment. April 2006 asked the SME do they use the following:

• Enterprise Resource Planning (ERP)• Customer relationship management (CRM)• Supply chain management (SCM• Knowledge Management System (KMS)

Supply is limited by e.g. the cost of shelf space or by the amount of TV channels that can fit into spectrum allocation

A paradigm change in networking – explained with an economic rationale

Economics: Chris Anderson (2006) The Long Tail: What happens to demand when supply is no longer limited

Demand follows down the long tail e.g. digital music stores have million and beyond items in store. The tail is 20% or even more of the market, it’s a new market

A paradigm change in networking – explained with a mathematical rationale

Mathematics: the same curve is created as a result to the problem of six degrees (Strogatz ja Watts 1998) and emerges as a result of self organisation and bottom up. Barabasi (Albert et al) proved in 999, that the Internet is a scale free network. Vespignani proved in 2004 that it is the most efficient type of network from the perspective of diffusion.

• The dilemma of the Commons Lawrence Lessig. From the perspective of efficiency at a society level, having individual rights to (virtual) resources is not necessarily the most efficient way of organising. – Creative Commons, restructuring of copyright Lawrence Lessig– Number portability– Non licensed frequencies (WLAN) Yochai Benkler, Some economics of wireless

communications. Harvard law of Technology Volume 16 Number 1 Fall 2002

• One might conclude that as technology develops further some resources can be placed into a commons to achieve efficiency at the level of society

A paradigm change in networking – explained with a rationale of Law

Implications – 6 examples of scaling up • email vs SMS => Hypothesis 1: the western mobile

internet has contained no elements that network efficiently (are efficient in a scale free structure sense). Success can be achieved by adding elements which network efficiently (e.g. email, a more “internet based” business model e.g. flat rate, search engine etc).• WLAN vs. 3 G, from individual Wlan´s to networked structures FON http://en.fon.com/, OpenSpark, open City WLAN, WLAN in a mobile • Digital TV vs. internet (broadcast yourself) TV• The SME working bottom up• The change at a network level e.g. the travel industry i.e business 2.0• Do barriers exist to scaling up e.g. roaming

Europe 70 million broadband connections

A Paradigm Change – made easy:

• Is broadband pricing a fair deal?:

– Grandma pays 25 Euro for a 1 Megabyte broadband and uses the connection to read, the occasional email

– Teenager plays games on the Net, shares photos, downloads etc – the usage is perhaps even 10 000 fold

– An SME is somewhere between Grandma and Teenager– The local mobile operator and its roaming traffic between two

countries is in the proximity of the teenager. – Note people, enterprise and institutions . The bounders become

more blurred

Answer from the network perspective this is more fair than the old transaction based paradigm.

Economics: Chris Anderson (2006) The Long Tail: what happens to demand when supply is no longer limited?

Law: Lawrence Lessig and the dilemma of the commons

The internet is a scale free network (mathematics), Strogatz, Watts 1998, Barabasi 1999, Vespignani 2004).

History: The Human web a birds-eye view of world history J.R. McNeill &William H. Mc Neil

The new paradigm

The diffusion perspective – the diffusion of networking

Old Paradigm inside circle

New Paradigm outside circle, Increase of service orientation?

e.g. einvoicing

e.g. ehealth

The phone

e.g. skype

e.g. egovernment

Conclusions for research agendas – a focus on networking at the crossroads

• A focus on empirical evidence & case studies More sophisticated networking stories containing the coexistence of personal, company and community level motives can be found and should be searched for.

• Research should contain Sme´s as samples of a networked environment in search for changes at a network level and not require them to participate in financing the project!

• The relationship between technology and social aspects• The relationship between technology and the business model is

flat rate pricing fare? How should the flat rate pricing model scale i.e. the same price for an SME/an individual?

• The asymmetric relationship between individuals, companies and society

• How to create a company that can scale up the long tail quickly?• Searching for company 2.0 At some stage the business logic

experiences a major phase shift (e.g. the travel industry and the Internet) and a company 2.0 is created

• The diffusion of different e-initiatives (e-banking, ehealth, eidentity)• The virtual and the physical coexist (e.g. logistics or devices). The

internet is a scale free network. Scale free structures can be created by design. This structure should be created both in the virtual and the physical.

The old Paradigm is dead – Long Live the new Paradigm

Thank You

Ville Saarikoski@tieke.fi