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. Technology enables consumers and businesses to thrive in a digital world.

The composition of this industry is very different than that of most others; due to the brisk pace of innovation there is an unusually extensive investment in research and development 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 manufacturing and assembly costs are lower.


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 subsequent years. 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. Since then the technology has spread to mobile phones and tablets that offer all the services of a normal stationary computer. Cloud computing has revolutionized data storage and as a result devices are continually getting smaller and more advanced.


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 big revenue earners once they develop a hit product. Among computer hardware producers, the top names are Hitachi and Hewlett-Packard. Dell has been known for its direct-sale marketing strategy, yet in the rough times for PC’s of late has seen a considerable decline. 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, Google 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 now have Internet capability, as do game consoles, PDAs, and many other items. This convergence means that companies can expect increased competition from industries who were not previously direct competitors. Companies, such as Apple, have grown to be giants in their own right by offering both hardware and software. This business model has led other companies that have traditionally focused exclusively on software to also enter the hardware production industry.


By nature, the technology industry is constantly changing and evolving. On the corporate level, mergers and acquisition are common practice 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 technologies become increasingly integrated in many multifunctional devices.

Technology 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 a 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 for a large percentage of hardware companies, specifically markets in India, Japan, China, and other Asian locations.

One of the newer trends and arguably the future of the technology industry is data collection and analysis. Various technological companies collect structured and unstructured data from clicks on websites, to the length of your stay at a particular location (on a GPS device), to the frequency you repurchase an item. Most of this data is unstructured and hard to analyze but as analytics improve, this data is transformed to create patterns in consumer behavior, and will help companies be proactive rather than reactive.

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 United States, estimates put the percentage of counterfeit software being used around 20 percent. This proportion can be much higher as well, depending on the country. The third is security. With the entrustment of personal information and data, the industry has to face security issues such as system failure, security breaches, intellectual property abuse, and reputational damage from social media.

Future Outlook:

The technology industry creates quite a challenge for businesses; success depends on innovation and can go as quickly as it comes. Companies can risk their entire credibility on data breaches so it is important for them to build secure networks and develop solid risk management plans. Challenges this industry will face include the retirement of baby boomers, shifting pools of talent, increasing technical skill needs, and regulations.

However, the industry is well positioned for growth available in emerging and developed markets. The industry needs to focus on disruptive innovation as demonstrated by cloud computing, mobile devices, and social media. These innovations have been fairly recent new trends that will help companies reshape their strategies to accelerate product development, operations, strategies, and more. Technology companies should also focus on creating more user friendly applications. Expansion in mobile devices and tablets is crucial as more people retain portable devices and are looking for easy to use applications.


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