Chapter 1 : Relevance & Scope
1.1 Relevance
It’s not now that attention is paid to IT.
This is a quote from the Dean of Boston
University. In 2005, he stated that…
In fact, we with our program are doing
this a way longer. Handelsingenieur =
combination of economic courses and
technology courses.
Even before 2005, with the launch of the internet, many professors were setting their hopes on
teaching courses on e-commerce and IT
But then the dotcom bubble lowered the enthusiasm a bit. IT was less on the agenda. In 2006, iT
was putted back on the agenda
The dotcom bomb1
In other words after the ‘dotcom bubble’ burst they thought that there was no/less value
in technology in management. However this is rising again.
This course started in 2000. That is no coincidence. A lot of seemingly promising websites
completely disappeared. = bubble burst.
2005 - 2006 is the real start of e-commerce. Gradually IT and courses on IT were creeping back on
the agenda.
To underpin this: an overview of the
world's most valuable brands. If you
look at the industries: technology! This
gives an idea about the importance of
technology.
1.2 Scope
In order to understand the basic
economics of information
Fadia Farhat | VUB 2023-2024 7
,technology, one needs a good understanding of:
• the economics of information;
• the economics of networks
The conclusion is that in order to understand the basic economics of information
technology you need to understand 2 concepts very good.
Economics of information
Digital goods
compromise everything
that is digital : data
produced by users,
digital applications and services provided over the internet, and the storage and processing of
such data.
Information economy focuses on information products and how they are produced and traded.
The information economy is part of the digital economy, but the atter is broader in scope since it
also includes more than information goods.
Are information goods important: yes. Here you see the realisation that economies are based on
knowledge.
A lot of goods that were physical
before (books, music, movies) have
become real digital markets.
(Weightless economy)
2014: Software is eating the world =
it becomes more and more
important in an increasing amount
of sectors.
This observation that software is
eating the world is true. That has
important implications for
companies. To compete and grow
in the digital world, software is
important.
Economics of networks
Secondly, we need a good understanding of the
economics of networks.
Fadia Farhat | VUB 2023-2024 8
, If you look around: more and more things are organised as networks.
For example social media networks : largely based on networks effects or network externalities.
Value of a social media app depends on the number of users. The same is true for other networks,
such as mobile payment or sharing economy. For mobile payment, we have indirect network
effects because it is a Two-sided market : on one side, you have customers that are paying with
their smartphone and on the other hand, the retailers that accept those kind of payments. Here it
does not matter how many users have “apple pay” on their smartphone. What matters is how
many merchants accept this kind of payment. And how more customers have apple pay on their
mobile, the more the merchants will think about accepting this kind of payments => indirect
effects.
Such networks are dominant in the society we live in today. Think of the success of the sharing
economy with ride-sharing companies such as Lyft (app) and Uber (app)
Besides the increased flexibility that these platforms induce in terms of jobs, such networks are
valuable for companies, are an additional source of revenue and are crucial during the
pandemic. However, their enthusiasm was lowered by the high commissions taken by the apps.
We see sharing platforms in all sectors : in transport, restaurants, grocery and in shopping.
Jack Ma: a successful technology entrepreneur. Why is he
talking about cars? The operating system of cars is becoming
more and more sophisticated.
The value and attraction of the car is
important. It's an important battleground. If
they did not develop their own system
Hardware vs Software?
In the past there were only hardware and
software companies -> successful companies
are both. Software is important! Apple is an
example of a successful company.
« Digital-Physical fusion »
A statement by president and CEO of Nokia.
Every action in the digital world will have an
effect on the physical world and vice versa.
Whether this will become reality: we don't
know.
Fadia Farhat | VUB 2023-2024 9
1.1 Relevance
It’s not now that attention is paid to IT.
This is a quote from the Dean of Boston
University. In 2005, he stated that…
In fact, we with our program are doing
this a way longer. Handelsingenieur =
combination of economic courses and
technology courses.
Even before 2005, with the launch of the internet, many professors were setting their hopes on
teaching courses on e-commerce and IT
But then the dotcom bubble lowered the enthusiasm a bit. IT was less on the agenda. In 2006, iT
was putted back on the agenda
The dotcom bomb1
In other words after the ‘dotcom bubble’ burst they thought that there was no/less value
in technology in management. However this is rising again.
This course started in 2000. That is no coincidence. A lot of seemingly promising websites
completely disappeared. = bubble burst.
2005 - 2006 is the real start of e-commerce. Gradually IT and courses on IT were creeping back on
the agenda.
To underpin this: an overview of the
world's most valuable brands. If you
look at the industries: technology! This
gives an idea about the importance of
technology.
1.2 Scope
In order to understand the basic
economics of information
Fadia Farhat | VUB 2023-2024 7
,technology, one needs a good understanding of:
• the economics of information;
• the economics of networks
The conclusion is that in order to understand the basic economics of information
technology you need to understand 2 concepts very good.
Economics of information
Digital goods
compromise everything
that is digital : data
produced by users,
digital applications and services provided over the internet, and the storage and processing of
such data.
Information economy focuses on information products and how they are produced and traded.
The information economy is part of the digital economy, but the atter is broader in scope since it
also includes more than information goods.
Are information goods important: yes. Here you see the realisation that economies are based on
knowledge.
A lot of goods that were physical
before (books, music, movies) have
become real digital markets.
(Weightless economy)
2014: Software is eating the world =
it becomes more and more
important in an increasing amount
of sectors.
This observation that software is
eating the world is true. That has
important implications for
companies. To compete and grow
in the digital world, software is
important.
Economics of networks
Secondly, we need a good understanding of the
economics of networks.
Fadia Farhat | VUB 2023-2024 8
, If you look around: more and more things are organised as networks.
For example social media networks : largely based on networks effects or network externalities.
Value of a social media app depends on the number of users. The same is true for other networks,
such as mobile payment or sharing economy. For mobile payment, we have indirect network
effects because it is a Two-sided market : on one side, you have customers that are paying with
their smartphone and on the other hand, the retailers that accept those kind of payments. Here it
does not matter how many users have “apple pay” on their smartphone. What matters is how
many merchants accept this kind of payment. And how more customers have apple pay on their
mobile, the more the merchants will think about accepting this kind of payments => indirect
effects.
Such networks are dominant in the society we live in today. Think of the success of the sharing
economy with ride-sharing companies such as Lyft (app) and Uber (app)
Besides the increased flexibility that these platforms induce in terms of jobs, such networks are
valuable for companies, are an additional source of revenue and are crucial during the
pandemic. However, their enthusiasm was lowered by the high commissions taken by the apps.
We see sharing platforms in all sectors : in transport, restaurants, grocery and in shopping.
Jack Ma: a successful technology entrepreneur. Why is he
talking about cars? The operating system of cars is becoming
more and more sophisticated.
The value and attraction of the car is
important. It's an important battleground. If
they did not develop their own system
Hardware vs Software?
In the past there were only hardware and
software companies -> successful companies
are both. Software is important! Apple is an
example of a successful company.
« Digital-Physical fusion »
A statement by president and CEO of Nokia.
Every action in the digital world will have an
effect on the physical world and vice versa.
Whether this will become reality: we don't
know.
Fadia Farhat | VUB 2023-2024 9
