New IT - A Paradigm Shift

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New IT – A Paradigm Shift
White Paper

October 2012

1 | New IT – A Paradigm Shift © 2012 Edcent Technologies

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Introduction
Information Technology has played a very important role in the transformation of global economy. This role, however, has gone through a long evolution of
products and systems. Till 1960, the role of information systems was simple. They were mainly used for electronic data processing (EDP), transaction
processing and record-keeping. The post 1960 period saw the introduction of report based systems that helped business owners and managers in the decision
making process.

In the 1980s, the introduction of personal computers at workplace and home empowered individuals with the enormous potential of computers. This change
in computer usage gave way to the rapid development of semiconductor industry led by Intel and packaged software industry led by Microsoft. Moreover, the
introduction of standard internet protocol suites (TCP/IP) led to the emergence of an interconnection of information systems called the Internet.

In mid to late 1990s the long standing problem of an integrated set of software applications that would cater to the needs of most businesses was solved by
Enterprise Resource Planning (ERP) systems. ERP systems integrated all aspects of an organization, including customer relations, planning, manufacturing,
sales and resource management – virtually every business function. The Late 90s also witnessed the invention of Web Mail that not just introduced one more
use of computers, but became the primary reason for adoption of computers at a larger scale. As internet and web-mail became commonplace, a large
number of users worldwide adopted computers as their tool of choice for communication and collaboration.

The new millennium came up with an entirely new set of software solutions which would build upon the fundamental structure of the internet. Software
applications such as Search Engines analyzed the vast pool of information available on internet and made that information easily available to the masses.
Further, mid 2000s saw the rise of social networking and e-commerce phenomenon that introduced new and innovative uses of computers. These and many
other new found uses of internet have led to some fundamental changes to the way computers and software applications are designed. The most prominent
of these changes are the widespread adoption of touch interfaces and the delivery of software as a service, developed and deployed through an open market.


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Exhibit 1
From mainframes to social networks
Evolution of information systems 1950-2010

1950-1970 1977-1990 1990-2000 2000-2010

Personal Computers Internet, Enterprise Search Engines, Social
MainFrames (PC), Packaged Resource Planning Networking,
Software (ERP), Web Mail e-commerce

Exhibit 1 shows the evolution of information systems during last five decades. During every decade since 1950, major technological changes were
introduced that transformed the way information systems were built and used. The last decade observed the emergence of companies that would
leverage the internet in order to build innovative solutions that are still influencing the human-computers relationship.


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The IT evolution discussed in previous section can also be described from the user interface and device usage perspective. Exhibit 2 shows how various
computing devices have evolved over last three decades - from text based, keyboard/mouse driven tools to touch panel based, multi-media rich devices.
Further, the technical evolution in software and hardware technologies has also brought some very important behavioral changes to the user-computer
interaction such as the shift in primary purpose of computers from content creation to content consumption - as observed in case of modern tablet PCs and
smart phones (Exhibit 2).

Exhibit 2
From text to touch
Evolution of user-interfaces, input devices and device usage

Graphics Mouse

Text Touch Keyboard Fingers

Communicate

Create Consume


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“..the evolution has touched every aspect of the information
systems. We have come a long way from text based user
interfaces to touch panels; from using keyboards and mouse to
our fingers; from content creation to content consumption.”


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It’s a fact that today’s IT systems have been developed after decades of research, development and large scale implementations but they still perform the
same basic tasks that they used to in the mainframe era i.e. gathering, processing and presenting information. If that’s true then what’s going to take these
systems to a new level? Is it the widespread use of hand held devices or the cloud based applications reaching out to businesses and individual consumers
alike?

“Last five decades, from 1960-2010, have brought tremendous
changes to the way humans produce and consume information.
Decade of 2010 also started with some very promising upgrades to the
old systems. As we progress into 2013, we’ll observe further changes
in the way information systems are designed and used.”


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New IT – A Paradigm Shift
New IT defines the modern systems in place or under development to help us consume and produce information. What’s new about New IT is that it brings
enormous changes to the way we have been using networks and computers to fulfill our communication and computing needs. New IT comprises of various
entities that are currently helping us achieve the next level of information and communication technology systems. It is to be noted here that though some of
these entities have already been in place for years, introduction of complimentary changes and the eventual amalgamation of various such entities have given
birth to a larger, highly integrated and ubiquitous system that is now prevalent in our day-to-day lives. New IT, thus, relates to every sub-system, product,
solution or service that plays a role in delivering the aforementioned modern information system.

In specific terms, New IT relates to the development and adoption of various IT entities such as:-

1. Cloud Computing and IT Commoditization
2. Mobile Data Networks
3. Smart Connected Devices
4. Modern Software Applications including Big Data applications

In further sections, we will define various features of New IT and explore how exactly New IT can change the way we build and use information systems.


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Exhibit 3
Information systems - 2010 and beyond

1950-1970 1977-1990 1990-2000 2000-2010 2010-Future

Personal Internet, Enterprise Search Engines, Cloud Computing,
MainFrames Computers (PC), Resource Planning Social Networking, Smart Connected
Packaged Software (ERP), Web Mail e-commerce Devices, LTE, Big
Data


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Three Pillars of New IT - Efficiency, Integrity and Ubiquity

Three main features define New IT – Efficiency, Integrity and Ubiquity. While efficiency defines various cost and operational efficiencies achieved through the
use of New IT, integrity relates to the completeness of information systems achieved through end-to-end integration of numerous sub-systems. Ubiquity
means the anytime anywhere anydevice availability of systems and data.

Exhibit 4
Three pillars of a modern information system

Efficiency Integrity Ubiquity
High Output
Seamless Integration Anywhere Connectivity
Low Cost
Excellent Service Delivery Anytime Availability
Better Resource
Easy System Management On any device
Utilization


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“New IT brings three fold changes to traditional information
systems – it increases the operational and cost efficiencies,
integrates various sub-systems to deliver a seamless computing
experience and facilitates true mobility”


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Efficiency

Through the effective use of New IT, businesses and individuals can achieve greater efficiencies in terms of cost, output and resource utilization. Moreover,
the efficiency pay-offs of New IT are not just limited to customers but benefit the entire commercial ecosystem by facilitating better quality of service at
reduced costs.

The gains to business customers can be explained from two perspectives. First, the technological capability (infrastructure, platform, software) at the
disposal of various small and medium businesses willing to adapt to New IT is enormous. For example, only a very small number of SMBs have the
knowledge and expertise to install and manage commercially available ERP and CRM packages. By shifting from on-premise infrastructure to cloud based
solutions, these companies can leverage the vast reserves of technical capability provided by their cloud vendor, without worrying about the associated
deployment and maintenance complexities.

Second, the contractual structure made available by subscription-based solutions brings two-fold cost advantages to the customers: a) It removes the initial
large scale expenditures incurred in building an on-premise IT infrastructure and b) It brings down the running costs of an enterprise grade IT infrastructure
by 25-50%. In this way, use of New IT results in huge capital surpluses that can be used by enterprises for other business activities.

“..the efficiency pay-offs of New IT are not just limited to customers
but benefit the entire commercial ecosystem by facilitating better
quality of service at reduced costs”


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Integrity

Traditionally, system integration has enjoyed a special attention from an IT system perspective. In fact, one of the main purposes achieved by IT evolution
has been the integration of various systems in order to deliver an enhanced computing and communication experience. New IT adopts a new approach
towards this critical aspect of information systems. New IT identifies various ingredients of a modern IT system and gels them together in a seamless fashion.
Every component of a New IT system is integrated in a way that underlying complexities of the system are hidden from the end user. For example, the
Software as a Service offering takes the burden of managing the inherent infrastructure and software off the end user. On the other side, in a centrally
secured environment, the handheld and light weight terminal devices are as much a part of the enterprise system as the server infrastructure. This high level
of integration consolidates the otherwise dispersed sub-systems, thereby delivering an easily manageable and highly scalable system.

Further, such high level of integration creates room for the development of innovative software applications that can leverage the vast pool of data
generated by various information systems. Famously referred to as Big Data, these vast reserves of data can be easily analyzed and manipulated by using the
immense compute power and storage facility made available by highly integrated New IT systems.

“New IT identifies various ingredients of a modern IT system and gels
them together in a seamless fashion”


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Ubiquity

Ubiquity is one aspect of New IT that equally touches all three dimensions of an information system i.e. hardware, software and network. Although, software
and hardware infrastructures have made good progress in the last decade, the data networks have lagged behind in delivering business grade IT capability
over a network that is available throughout a wide area. New IT identifies LTE (Long Term Evolution) and LTE Advanced as a solution to this problem. With
the downlink speeds of up to 299.6 Mbps (LTE) and 1 Gbps (LTE Advanced) users will not have to depend on wired networks to access their virtual desktops
or a SaaS application.

Further, the web based delivery models of various software and infrastructure solutions has enabled businesses to consume the enterprise applications over
internet. The wide spread use of handheld devices is also encouraging a shift from bulky and stationary terminal devices to lightweight and mobile devices.

“Ubiquity touches all aspects of information systems – (portable)
hardware, (web-based) software and (mobile) network”


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Some fundamental questions arise at this point..

“To what extent has New IT realized its three features?

What are the adoption rates for various New IT systems?

What benefits have users availed so far?”


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The Current Scenario

In previous sections we discussed how IT systems have evolved over time and what may be a logical upgrade for them. We also questioned the state of
traditional IT systems and highlighted various benefits brought forth by New IT vis-à-vis it’s three main features – efficiency, integrity, and ubiquity. While it’s
true that traditional IT systems have strived to achieve efficiency, integrity and ubiquity, they have struggled to provide all these features in a transparent -
under one roof - fashion. Moreover, the quality of service has not been as good as that achieved through New IT. Broadly speaking, traditional IT has not yet
been able to achieve what is famously been termed as (true) on-the-go computing. With virtualization and remote computing, traditional IT began providing
such an experience but it has been anything but truly mobile; given the various system and network bottlenecks. Another important aspect that traditional IT
has failed to address is the delivery of technology as a service. The natural shift of commoditization that took place in power and telecom industry has long
been sought for IT as well but issues such as data security, scale and good quality wide area networks have kept this desire from getting realized. New IT is
catering to all these issues and more. Let’s see how.


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Smart Connected Devices

The last 2-3 years have seen a sky rocketing growth in the adoption of handheld devices such as tablets and smart phones (Exhibit 5). What implications might
it have on existing systems? Firstly, the behavioral change in the usage of computing devices has fueled the wide scale installation of modern mobile data
networks such as 3G and LTE. Secondly, the high penetration rate of handheld devices has led enterprise grade applications to emulate applications (apps)
based software consumption.

Exhibit 5 shows global shipments for computing devices (Desktops, Laptops, Smartphones and Tablets). The smart devices (tablets and smartphones)
accounted for 70.3% of the total device shipments in 2012 and will witness a staggering growth rate of 95.9% (for smartphones) and 131.2% (for tablets) over
the four year period of 2012-2016.


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Exhibit 5
Smart Connected Device Market by Product Category & Market Share
2012-2016

Source: IDC Worldwide Quarterly Smart Connected Device Tracker, December 10, 2012


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There will be an upward demand bias in case of tablet computers. The demand for tablets will stay high in developed markets but significantly higher in
China. (Exhibit 6)

Exhibit 6
Extreme Interest in Purchasing a Tablet over the Next 12 Months

China 41%

International Demand 21%

UK 20%

Germany 18%

Japan 16%

France 15%

U.S. 11%

0% 15% 30% 45%
SM
Source: Morgan Stanley Research, AlphaWise


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While tablets are currently used for content consumption through activities like web browsing, social networking and watching videos, there will be an upward
trend towards content creation (only 20% of the tablet owners use the device to create or edit files) as new mobile applications and faster processors become
available (Exhibit 7).

Exhibit 7
Tablets Geared Towards Content Consumption
Percentage of Users who use the device regularly for each activity

SM


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The widespread use of tablets has also led to reduction in overall time spent on PCs. We believe that this trend will take PC usage to a further low as tablets
become more powerful and rich with more productive mobile applications (Exhibit 8).

Exhibit 8
Tablets impacting device usage
Impact of New Tablet Purchase on Use of Other Devices

13% 9%
16% 12% 16%
21% 21% 21%
25% 26% 16%

56%
55%
60% 56%
64% 50%
49%
65% 66% 66%
64%

30% 32%
25% 24% 23%
22%
10% 11% 18%
13% 11%
1% 2% 3% 2% 3% 2% 3% 5% 2% 3%

Internet Samrtphone Internet to GPS Gaming Portable Portable eReader Netbook Laptop Desktop
Connected TV Player Console Gaming Media Player Computer Computer
TV Console

Do not use it anymore Using less frequently than before Same as before Using more frequently than before

Source: The Nielsen Company, Q1 Mobile Connected Device Report


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An interesting trend that has been observed is the enterprise adoption of tablet PCs (Exhibit 9). 2/3 of the companies in 2012 agreed to allow the use of tablets
in the secure enterprise systems. A rather encouraging 51% of them would take the lead in buying tablets for employees while 16% would allow the use of
employee owned tablets. Interestingly, this emerging trend has made terms like BYOD (Bring Your Own Device) commonplace.

Exhibit 9
Tablets being adopted in 2/3 of Companies Surveyed
Tablet Usage Trend in Enterprises

0% 20% 40% 60% 80% 100%

Currently 21% 8% 71%

In One Year 51% 16% 33%

Purchase for Employees Allow Employee Owned Tablets on Network Do Not Allow

SM
Source: AlphaWise CIO survey


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Cloud Computing

Cloud Computing forms the backbone of the New IT systems as it replaces the traditional IT infrastructure and applications. Cloud computing, offered in three
variants viz Infrastructure, Platform and Software, is a promising solution to resolve the issues related to scale and maintenance of enterprise grade systems
while minimizing the overall cost of owning such systems.

From implementation standpoint Cloud is provided in three ways:-

 Private: The underlying infrastructure is used by a single customer.
 Public: A centralized infrastructure is used to deliver cloud solutions to a number of customers.
 Hybrid: A combination of private and public clouds where some applications are deployed on public cloud while other, usually more critical, remain on a
private cloud.

“Cloud Computing changes the way users pay for IT infrastructure. It
also changes the amount of computing power and storage capacity
available at users’ disposal along with the time in which such facilities
can be procured and put to active use.”


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Exhibit 10 shows the global cloud adoption rates. SaaS stands first when three types of cloud offerings are compared. In fact, the ongoing investment in IaaS
and PaaS are mostly led by the increasing interest in SaaS. The increasing use of SaaS can be attributed to the high level of abstraction it provides as compared
to IaaS and PaaS.

Exhibit 10
SaaS leading the Cloud Adoption
Cloud computing adoption rates 2009-2012
Percent of respondents

54

37
35
SaaS adoption
29 IaaS adoption
25 PaaS adoption
23
21
17
14

8 9
5

2009 2010 2011 2012

Source: Forrsights Software Survey; Enterprise and SMB Software Survey, NA and Europe


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Exhibit 11 shows software application wise adoption of cloud based solutions. The majority of cloud adoptions will come from Customer Relationship
Management (CRM) applications, Web, e-commerce and office collaboration tools. We believe that the adoption of cloud based solutions will be uneven with
some public/hybrid cloud based applications finding widespread adoption while others staying on private cloud or on-premise systems.

Exhibit 11
Companies migrating to the cloud in some areas more than others
CIOs surveyed on application migration
Percent expecting migration to public/hybrid cloud by application

Customer relationship management 46

E-commerce/Web 42

Collaboration 35

Supply chain 22

Other 19

Development/testing 18 Customer-facing and
employee-productivity
Tier 1 line of business 10 applications will lead
migration to the cloud
Average 21

Other applications include weighted average for content management, other lines of business, data warehouse, operations, ERP, engineering and
IT applications
Source: McKinsey CIO/CTO Cloud Online Survey; Gartner-McKinsey Analysis


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Exhibit 12 shows the cost advantages achieved by cloud based offerings in case of small and medium businesses. The cost advantage provided by cloud
solutions as it benefits small and medium businesses will account for almost one-fourth reduction in standalone application ownership (through SaaS) and a-
half in case of raw infrastructure (through IaaS).

Exhibit 12
Cloud's growth driven by favorable economics for SMB customers

Source: McKinsey Analysis


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Big Data

Big Data refers to the large sets of data generated by traditional and existing data systems. These data sets are difficult to capture, store, analyze and present,
due to their enormous size. The emergence of Big Data is mainly attributed to the increasing number of people interacting with data or information. There are
4.6 billion mobile-phone subscriptions worldwide and there are between 1 billion and 2 billion people accessing the internet. Between 1990 and 2005, more
than 1 billion people worldwide entered the middle class which means more and more people who gain money will become more literate which in turn leads to
information growth. The world's effective capacity to exchange information through telecommunication networks was 281 petabytes in 1986, 471 petabytes in
1993, 2.2 exabytes in 2000, 65 exabytes in 2007 and it is predicted that the amount of traffic flowing over the internet will reach 667 exabytes annually by 2013.

New IT is influencing both the generation and management of big data in a profound way. As the high level of infrastructure scales (storage and processing
power) are achieved, the maintenance and usage of big data will become easier. The use of big data offers huge untapped potential for value creation. Many
organizations and governments can leverage big data to improve the allocation and co-ordination of human and physical resources, cut waste, increase
transparency and accountability, and facilitate the discovery of new ideas and insights.

“..as high level of infrastructure scales (storage and processing power)
are achieved through New IT, the maintenance and usage of Big Data
will become easier.”


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Exhibit 13
Big Data numbers - Volume, Velocity, Variety

25 quintillion bytes 1
Amount of data generated every day through online or mobile financial transactions, social media traffic, and GPS, among other sources.

90%
Share of the world's data created in the last 2
By 2015, nealry

3 billion 1.5m
No. of additional data-literate managers and
2 3

people
years anlysts needed in the U.S. by 2018

20 will be online, pushing the data
created and shared to nearly $3.3m
No. of months it is expected to take for digital
data to continually double between now and
8 zettabytes Estimated revenue for worldwide BigData
storage services by 2016
4
3
2020

Source: 1 IBM, bringing big data to the enterprise
2 McKinsey Global Institute "Big Data: The next frontier for innovation, competition, and productivity." May 2011
3 Global Pulse "Big Data for Development-Opportunities and Challenges" May 2012
4 IDC, "Worldwide Storage Services Opportunity for Big Data 2012-2016 Forecast" 2012


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The Exhibit 14 shows the Big Data value chain and the role New IT solution providers can play in creating and leveraging this value. As seen, New IT vendors will
have an important contribution to three chief stages of the Big Data value chain – generation, aggregation and analysis of data.

Exhibit 14
Big data constituencies
Big data activity/value chain

Source: McKinsey Global Institute analysis


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Mobile Data Networks

Since the first commercial roll-out of 3G in 2001, the global adoption rates for modern mobile data networks has seen an excellent growth and with the
introduction of LTE (3.X G) and LTE Advanced (4G), the consumption of data intensive applications will witness a major shift from fixed line, small area
networks to wide area networks.

Owing to the staggering adoption rates of mobile devices and technological innovations in mobile data networks, mobile internet will surpass desktop internet
in terms of total users by 2014 (Exhibit 15).

“..led by 3G+ technologies, mobile Internet will surpass desktop
Internet by 2014 in terms of users”


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As shown in Exhibit 15, the growing mobile internet will cross the 1.5 billion users mark by 2013, replacing desktop internet as the primary internet connectivity
channel by 2014.

Exhibit 15
Global Mobile vs. Desktop Internet User Projection, 2007-2015E
Internet Users in Mn

2000

1600

1200

800
Mobile Internet Users
Desktop Internet Users
400

0
2007 2008 2009 2010 2011 2012 2013 2014 2015

SM


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The growth of mobile internet will go hand in hand with the mobile internet enabled device penetration. We believe that by 2020, the number of mobile
internet enabled devices in use will reach 10 bn mark (Exhibit 16). This growth can mainly be attributed to better processing power, improved user interface,
lower prices and expanded service offerings provided by mobile internet, application and device vendors.

Exhibit 16
Computing Growth Drivers Over Time, 1960-2020E

Source: Morgan Stanley Research


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Exhibit 17 shows the global 3G+ (WCDMA, HSPA, TD-SCDMA, 1xEV-DO, LTE and WiMax) penetration. In 2012, global 3G+ penetration crossed the sweet spot of
30% which by 2014 will reach 43% (of the total mobile internet subscribers).

Exhibit 17
Global 3G+ Subscribers, 2007-2014E

Source: Morgan Stanley Research


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Conclusion
The Future

What is now expected from these new information systems? What are the possible evolution paths that these systems may follow? That remains to be seen
while a larger part of world population gets accustomed to the New IT systems. The current growth patterns indicate a healthy rise in adoption of these
technologies while the traditional methods of information creation and consumption are replaced.

Based on our analysis we predict that over a period of next two to five years:

1. New IT will emerge as a strong replacement option to the traditional IT such as desktop computing, fixed line internet and on-premise infrastructure.
2. Overall costs of owning an IT system (both for individuals and businesses) will be reduced by 25 to 50 percent.
3. Cloud computing will continue to replace on-premise systems, majorly for small and medium businesses.
4. Light weight terminal devices such as smartphones, tablets and thin clients will be employed for greater use in enterprises and will eventually replace
old terminal devices such as desktops
5. Individuals will use multiple devices for separate dedicated uses such as content creation and content consumption.
6. Mobile internet will see enormous growth in number of subscribers and will replace desktop internet as the primary connectivity channel.
7. Big Data will give rise to a new class of software applications that will be used primarily by various institutions and sectors producing and consuming
large data sets esp. governments, health care and retail. New IT, equipped with large processing power, huge storage capacity and ubiquitous systems
will enable the wide scale adoption of Big Data applications.

We believe that the decade of 2010 will be the decade of emergence of New IT systems. This shift will not just help improve the quality of old systems but will
enable individual, SMBs and Large Enterprises in private and public domain to leverage immense potential of modern information systems. We look forward to
witness this colossal upgrade of information and communication systems – rightly coined as a “Paradigm Shift”.


New IT - A Paradigm Shift

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