The release of the Shift Index from the Deloitte Cen­ter for the Edge is an excel­lent occa­sion to come back on the foun­da­tions of the var­i­ous Shifts that are cur­rently redefin­ing the way busi­nesses have to operate.

The core dig­i­tal infra­struc­ture tech­nolo­gies (Com­put­ing, Stor­age, Net­work­ing) are show­ing an expo­nen­tial increase of their cost/performance ratio, and there are no signs of sta­bi­liza­tion. This expo­nen­tial and con­tin­u­ous improve­ment in per­for­mance directly enables almost all the other shifts, most notably the accel­er­at­ing pace of change. What is cru­cial how­ever, is both the sheer scale of improve­ment and a pace which shows no sign of sta­bi­liz­ing in the near future, con­trary to past ground­break­ing infrastructures:

The expo­nen­tially advanc­ing price/performance capa­bil­ity of com­put­ing, stor­age, and band­width is con­tribut­ing to an adop­tion rate for the dig­i­tal infra­struc­ture that is two to five times faster than pre­vi­ous infra­struc­tures, such as elec­tric­ity and tele­phone net­works.¹

The Foun­da­tion Index

The team has defined a Foun­da­tion Index that “quan­ti­fies the first wave of the Big Shift, which involves the fast-moving, relent­less evo­lu­tion of a new dig­i­tal infra­struc­ture and shifts in global pub­lic pol­icy that have reduced bar­ri­ers to entry and move­ment.“²

It is encom­pass­ing more than just the core tech­nolo­gies, but these are clearly one of the key dri­ver of the index³:

If we now have a look at the 3 tech­nolo­gies that make up the “Tech­nol­ogy Per­for­mance” index, the price/performance increase is dras­tic, and accord­ing to the report, shows no sign of sta­bi­liz­ing in the near future.

Com­put­ing

Over time, the Shift Index will look for changes in com­put­ing per­for­mance or cost curves. That said, we expect this met­ric to be highly pre­dictable. While the his­tory of tech­nol­ogy is rife with pre­dic­tions that turned out to be wrong, the abil­ity of human intel­li­gence to con­stantly extend Moore’s Law into a rel­e­vant future has per­sisted. Regard­ing the exten­si­bil­ity of Moore’s Law, Moore said, “One of the prin­ci­ple ways we achieve this is by mak­ing things smaller and we’re approach­ing the limit that mate­ri­als are made of atoms. We’re not too far away from that. But talk­ing to the Intel tech­nol­o­gists, they think they can still see rea­son­ably clearly for the next four gen­er­a­tions. That’s fur­ther than I’ve ever been able to see. It’s amaz­ing how cre­ative the peo­ple have been about get­ting around the appar­ent bar­ri­ers that are going to limit the rate at which the tech­nol­ogy can expand.” Beau Vrolyk, for­mer exec­u­tive at SGI and cur­rent Sil­i­con Val­ley investor with deep exper­tise in dig­i­tal sys­tems agrees: “As device physics approaches a limit to Moore’s Law, archi­tec­ture inno­va­tions like multi-core and par­al­lelism have allowed the indus­try to con­tinue to pro­vide signi icant advances in price/performance that resem­ble Gordon’s pro­jec­tions.” We can assume that the cost per­for­mance of com­put­ing will con­tinue to decline at its cur­rent tra­jec­tory for the fore­see­able future and to add to the forces under­ly­ing the Big Shift.⁴

Dig­i­tal Storage

Dur­ing the past 16 years, the cost of one giga­byte (GB) of stor­age has been decreas­ing at an expo­nen­tial rate from $569 in 1992 to $0.13 in 2008, as shown in Exhibit 16. To put this into per­spec­tive, Sukhin­der Singh Cas­sidy, Google’s vice pres­i­dent of Asia-Paci ic and Latin Amer­ica oper­a­tions, observes, “Since 1982, the price of stor­age has dropped by a fac­tor of 3.6 mil­lion … to put that in con­text, if gas prices fell by the same amount, today, a gal­lon of gas would take you around the earth 2,200 times.”12 Dur­ing this time, the com­pound­ing effects of tech­nol­ogy inno­va­tion, com­pet­i­tive pres­sures, mar­ket demand, and the sub­sti­tute effect (stor­age as util­ity) drove costs down dra­mat­i­cally while con­tribut­ing to expo­nen­tial increases in performance.

Will per­for­mance con­tinue? There is no con­sen­sus on how long IT tech­nol­ogy inno­va­tion in stor­age will con­tinue at its cur­rent pace. Yet insa­tiable mar­ket demand and con­stant advances and new inno­va­tions com­ing from a raft of new tech­nolo­gies includ­ing nan­otech­nol­ogy, 3D holo­graphic stor­age, car­bon nan­otubes, and heat-assisted mag­netic recording13 sug­gest that the decrease in stor­age cost/ per­for­mance will con­tinue for the fore­see­able future.⁵

Band­width

Corn­ing opti­cal fiber sci­en­tists con­clude that due to the decrease in band­width cost/performance ratio, iber net­work “traf­fic is going up by 2.5X every two years and capac­ity is going up by 1.6X and this trend is likely to con­tinue on this tra­jec­tory for the fore­see­able future.”15 This assess­ment implies that band­width cost/performance trends are also likely to con­tinue in the future.⁶

As the name of this index sug­gest, the pace of improve­ment for these 3 tech­nolo­gies pro­vide the foun­da­tions for the shifts redefin­ing the way busi­nesses (and any other orga­ni­za­tions) have to behave and com­pete. I will ref­er­ence this post in future analy­sis, but won’t expand here: I could not pro­vide a bet­ter overview than the excel­lent report itself.

Ref­er­ences

1. The Shift Index, Deloitte Cen­ter for the Edge, John Hagel, John Seely Brown, Lang Davi­son [↩]
2. The Shift Index, p. 20 [↩]
3. The Shift Index, p. 22 [↩]
4. The Shift Index, p. 25 [↩]
5. The Shift Index, pp. 27–28 [↩]
6. The Shift Index, p. 30 [↩]