Technology: Background

Industry Composition:

The technology industry is comprised of companies that design, manufacture, or distribute electronic devices such as computers, computer-related equipment, computer services and software, scientific instruments, and electronic components and products, excluding consumer electronics. Technology enables consumers and businesses to thrive in a digital world.

The composition of this industry is very different that that of most others; due to the brisk pace of innovation, unusually extensive investment in research and development is required. As a result, the industry’s workforce consists of a much larger proportion of engineers and other highly-skilled technical workers, relative to other industries, especially since product creation requires creativity, expertise, and precision. The technology industry also employs a relatively large workgroup engaged in sales and promotion, as the success of a new or improved product depends heavily upon consumers being aware of, and interested in, the item. While most of the sales for this industry occur in developed countries, most of the production of computer hardware takes place in emerging countries where manufacture and assembly costs are lower.

History:

The technology industry is relatively young; its origins can be traced to the 1904 invention of the two-element electron tube. Developments such as the transistor followed, as well as integrated circuits in the 1950s, and analog devices in 1960. Many of these inventions were a result of military research. The 1970s brought the invention of the integrated circuit board and the microprocessors that soon followed made home and personal computers a possibility in the years that soon followed. However, until the internet was available to common consumers, computers were not very popular. In the 1990s, when the internet was available to all, there was an explosion in the use of personal computers. That explosion made household names out of entrepreneurs such as Bill Gates and Steve Jobs. The early part of 2000 saw a drastically reduced demand for computers, but in 2003 and 2004 the market experienced a turnaround as consumers sought multi-tasking computers that could handle a myriad of photo, video, and audio applications.

Biotechnology, a technological application that uses biological systems, living organisms, or derivative thereof, to make or modify products or processes for specific use, began in ancient practices for basic food alteration. For example, to ferment beverages, leaven bread, and alter fruits and vegetables. Today, biotechnology is used in four main areas: agriculture, environment, biofuels, and healthcare. In recent decades, biotechnology has been used to find possible cures for cancer, creating insulin treatments, and researching autoimmune disorders, such as HIV/AIDS.

Leaders:

Contrary to what one might expect, most companies in this industry are small. This is because, although the product may be complicated, only a small investment is needed to fund the manufacture of many types of electronic components, especially in the software segment of this industry. However, these small companies are often bought by the big revenue earners once they develop a hit product. Among computer hardware producers, these number one names are Hitachi and Hewlett-Packard. Dell is also making waves with its direct-sale marketing strategy. The smaller companies that are not bought up must focus on differentiating their products and developing the brand name to compete with the diverse portfolios of the big companies.

As for software companies, Microsoft Corp., IBM Software, and Oracle Corp. rule the roost. These companies should not sit too easily, though, since recently consumer electronics products have been merging with products from the computer industry, for example phones with Internet capability, as do game consoles, PDAs, and many other items. This convergence means that companies can expect increased competition from industries were not previously direct competitors. Companies that currently occupy niche markets, such as Apple, are also winning market share away from the leaders by offering unique, appealing, user-friendly products.

Trends:

By nature, the technology industry is constantly changing and evolving. On the corporate level, mergers and acquisition are common since they allow companies to combine their resources and knowledge in a highly competitive environment. Computer companies now must compete with companies in the consumer electronics and telecommunications markets as the technologies become increasingly integrated in many multifunctional devices.

Technological companies tend to go abroad to grow revenues, secure market share, and gain access to low-wage workers. As a result, this borderless industry challenges companies to manage a global work force, currency hazards, technology transfers, and global supply chain, all the while responding to governments and regulators. Aside from international supply of technology, international demand for technological products is also increasing. International sales account fir a large percentage of hardware companies, specifically markets and India, Japan, China, and other Asian locations.

There are several issues of major concern to companies in the technology industry. There is an enormous opportunity to generate sales on products designed to run with or on the new operating system, as well as on products that must be upgraded because they are not compatible with the new, more advanced OS. The second major concern of computer software companies is piracy. In the U.S., estimates put the percentage of counterfeit software being used at around 20 percent. This proportion can be much higher as well, depending on the country.

Future Outlook:

The technology industry creates quite a challenge for businesses; success depends on innovation and can go as quickly as it comes. Technology companies are constantly looking for smart and innovative thinkers to keep the company’s competitive edge. Challenges this industry will face include the retirement of baby boomers, shifting pools of talent, and increasing technical skill needs.

However, the industry is well positioned for growth as consumption-minded populations constantly demand more features and more impressive devices. In any case, such inventions simply spur consumer spending further and create more markets for more products.