Wealth creation through digital technologies

Dhaka,  Sat,  10 December 2016
Published : 14 Oct 2016, 19:22:38 | Updated : 14 Oct 2016, 19:25:58

Wealth creation through digital technologies

Ownership of computing has become democratised. But, unfortunately, unlike in the past, users no longer know the requirements for their intended software applications to unlock latent growth potential, writes M. Rokonuzzaman
It is being perceived that the inventory of computing power is someway related to the wealth creation capacity of society. With the growth of personal computer (PC) density, the productivity in the US grew.  It is reported that software accounted for 12.1 per cent of all US labour productivity gains from 1995 to 2004 and 15.4 per cent of those gains from 2004 to 2012. Both smartphone ownership, reaching 20 per cent of handsets, and mobile broadband penetration are experiencing phenomenal growth even in developing countries. Despite such growth of computing density in society, the Organisation of Economic Cooperation and Development (OECD), a think- tank of rich countries, has warned in a recent report about slow global economic growth. In its interim report, it said that "the global economy is projected to grow at a slower pace this year than in 2015, with only a modest uptick expected in 2017."  The outlook also warns that a low-growth trap has taken root, as poor growth expectations further depress trade, investment, productivity and wages. Despite  democratisation of ownership of high performance computing devices and access to broadband, why is the world facing such a slowdown?

Referring to diffusion of digital innovations, in a recent opinion article, DaniRodrik, Professor of International Political Economy at Harvard University's John F. Kennedy School of Government, has initiated a debate 'whether these innovations will remain bottled up in a few tech-intensive sectors that employ the highest-skilled professionals and account for a relatively small share of GDP, or spread to the bulk of the economy.' There is also a growing body of references addressing this issue, broadly terming them as digital divide. The democratisation of smartphones, even in developing countries, has also raised a question, relatively new though, from another perspective-significant under-use of already available digital technology capabilities.

In developing countries, the highest concentration of digital technologies is in the form of mobile broadband connections and smartphones. Although both mobile broadband penetration and smartphone ownership have been accelerating, the usage seems to be limited to social networking, entertainment and basic communications. For example, in Bangladesh, more than 70 per cent usage of broadband is for the purpose of social networking over the Facebook. Similarly, as it has been pointed out in a report that in the USA, 'government services and health care, which together produce more than a quarter of GDP, have had virtually no productivity growth.'  The obvious question is why is the use of digital technologies in increasing productivity, income and new wealth virtually limited to only a few selected industries? Does it have any potential to spread through the whole society like electric bulb, to improve the income level of everybody, in every industry, across the world?

Moreover, why are the contemporary smartphones, having the computing power similar to supercomputers in 1990s, serving just basic communication purpose, adding value comparable to basic telecommunication services only? It appears that the underlying computing power of smartphones is similar to fragrance in a bottle with no opening. How can we create an opening to this huge computing power to shower the world, particularly the developing one, with the opportunity of productivity gain contributing to new wealth?   

Previous generations of technologies and innovations around them were targeted to delegation of roles of manipulation and providing energy from humans to machines. The challenge of integration of such innovation in diverse work processes was visible as well as intuitive. As a result, the diffusion rate in creating wealth was very high. On the other hand, the complexity of integration of underlying computing power of mostly diffused devices like smartphone is far beyond the intuitive capability. For example, although smartphone cameras are powerful enough to produce high-quality images of crops or fabrics, the processing of these images to determine the dose of fertiliser in a precise manner, or detecting the presence of defects in fabrics requires quite complex software capability. As a result, despite the availability of human-like capabilities of already available digital technologies, their application in increasing  productivity for creating new wealth is mostly under-utilised. For example, appropriate software applications running on already available smartphones have the potential to increase the productivity of farming, making more than 50 per cent families of developing countries direct beneficiaries of such digital innovations. Similarly, development of healthcare innovations around smartphones such as portable ultrasound or other diagnostic machines has the potential not only to create digital dividend for the bottom of the pyramid, it has also the potential of causing disruption to some of the industries of advanced countries, expanding wealth creation scope. The question could be if such potential exists, why is not private investment exploiting this opportunity?

Unlike in the past, instead of contracting out software requirements to contractors to translate them into software, many corporate customers as well as government departments are looking for the option of buying available software applications, at a fraction of price. For the same reason, despite the growth of use of software, number of in-house software professionals is not proportionately increasing. Another dimension of the twist is that unlike in the past, most of the customers of software, including even large corporate and government clients, do not clearly know about software requirements. Only upon seeing an application doing similar job, they can mention additional features the software should have to get their target jobs done.

Over the decades, the ease of software development has gone up, the performance of computing devices has improved, cost of computers has gone down, connectivity has become ubiquitous and ownership of computing has become democratised--making potential market of software larger. But, unfortunately, unlike in the past, users no longer know the requirements for their intended software applications to unlock latent growth potential. Moreover, users are not interested to commit the payment beforehand, whether contracting out software requirements to outside programmers, or to recruit them as in-house development staff members.   

The capitalisation of growing opportunity of creating new wealth with software has two major challenges. The first one is that users do not know requirements. On the other hand, academic curricula in producing software developers do not have any content to empower their graduates to know requirements on behalf of the users of software. The second one appears to be more complex. Users are not committing any payment upfront for the job of developing the software what they might need. These two challenges are basically keeping the growing opportunity of wealth creation through software mostly unexploited. As a result, despite democratisation of smartphone, tablets, PCs, and laptops, even in developing countries, the growing number of graduates having the capability of software development is virtually unemployed, or may be underemployed and those powerful machines are basically highly underused.

So far the focus has been on developing technologies and diffusing these serving narrow purposes. It's time the policymakers supported discovery of latent potential of wealth creation through digital technologies, and support the process of nurturing that potential into affordable solutions creating new wealth. Such support should be far deeper than counting the number of Internet penetration or smartphone ownerships. Moreover, exploitation of such opportunities are vital to address many of the Sustainable Development Goals (SDGs), which demand us to produce more outputs by consuming less inputs, while causing less harm to the environment.

The writer is Professor, Department of Electrical and Computer Engineering, North South University.
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