SBA

e-Business vs. ICT

It has long irked me that DED lumps e-Business and ICT into the same pot. Acquaintances in Government are aware of this frustration, it doesn’t endear me to DED Civil Servants, but it remains a sore point because until we address it we’ll never achieve our potential as a creator of ICT.

We proudly boast of our technology capabilities on the island - 4G, fibre-optic networks, data centres etc. and the technology companies that provide them - but few of these capabilities were developed here, they’re largely implementations of technology developed elsewhere. We bought it and rolled it out, showed commercial acumen and foresight in doing so, but did we create technology? No. Most of the technology exhibited on the island has been bought in from abroad and taken to market - and that matters, a lot.

There are exceptions, and I don’t want to marginalise them, on the contrary I admire them - Microgaming, PDMS, Iforium, AFD, Central Software, Riva and DPN spring to mind as companies that create and export technology on the island. Nor do I wish to denigrate Manx Telecom, Sure, Domicilium and others who operate and exploit technology here but the reality is that as service providers their technological creation is minor, their primary role is as logistics players in the value chain between creator and consumer.

Why does it matter?

e-Business, sometimes called e-Commerce, is about conducting business via the Internet; the term was adopted by IBM in the mid-nineties to describe the channel to market of providing transactions and services to distant consumers via the world wide web - it is typically the last step in a value chain. Obviously encouraging e-Business on the island is A Good Thing because it enables Manx companies to address global markets, but it is clearly a different beast to the development of technology for sale.

ICT development is about creating new technology products and services; the beauty of this is that they may be licensed or exported globally, and it’s hard for competitor companies and jurisdictions to take them away from you. Development is the U in USP (“Unique Sales Proposition”), it is the start of the value chain and the single greatest source of competitive advantage worldwide. Having strong development capability outweighs cheap manufacturing, superior distribution & logistics, and market access because each can be obtained from partners further along the value chain.

Basically e-Business and ICT development couldn’t be much less alike, the former is about channels to market and the latter is about new product design & development. Obviously some e-Businesses create their own original value, and some ICT businesses take their developments all the way to the market, but the vast majority in either category don’t, so trying to lump them together in the same sector development strategy is sub-optimal. If we say that ICT is part of e-Business we give a clear message to ICT entrepreneurs - we don’t understand ICT business needs.  If we said that e-Business was a part of the ICT sector the reverse would apply.

As a jurisdiction claiming expertise in e-Business we have little special to offer - we have good links to the Internet, but they’re expensive and many other jurisdictions have better and cheaper links; we have good data centres for hosting, but again many other jurisdictions have as good and cheaper. Our e-Business sector is principally dominated by e-Gaming, in which we created specific support and regulatory advantage; there are non-gaming e-Businesses on the island, but they are few and small when compared with e-Gaming because we really don’t offer much advantage over other jurisdictions. Obviously we want and need to keep pushing the island as a home for e-Business, the more of it we can get the better, but imagining that we have something special to offer is naive. e-Business on the island works principally for those verticals where we have created regulatory advantage - Gaming and Financial Services. The gaming people get e-Business in a big way, in general the Financial Services people don’t. We have the potential to create a new vertical in e-Health / telemedicine, particularly if we beef up our data protection laws, but we have more potential in Financial Services although some would say our regulatory environment is now too onerous.

ICT development on the other hand doesn’t need any regulatory assistance except where communications licenses are required. What it does need is talent and to a lesser extent testbeds. Top-notch technology developers tend to be highly intelligent individualists, they need to be slightly oddball in order to solve problems that have stumped others, they almost universally take a slightly different path from the crowd. The island suits many such people, they can pursue their interests in a more liberal environment here.

ICT development needs are, in general, less capital-intensive than other business models. The primary input requirement is man-hours, and long incubation / product development cycles are common meaning that ICT startups need a different approach to funding and support - capital and marketing grants don’t have much influence in ICT product development; loans and equity funding are far more powerful.

Because ICT is so universal, and has such a broad range of application, one of the key enablers is the opportunity to interact with target sectors, whether in business or government, to learn what they need from new technology. ICT developments can be developed and trialled with smaller scale customers such as those in the Isle of Man prior to roll-out to larger customers abroad. One of the major difficulties in ICT development is finding the first candidate customers because larger organisations commonly want to minimise risk, buy something at least partially proven, and roll-out on a large scale. The Isle of Man provides an ideal development and testbed environment for ICT because potential customers are smaller in scale and generally more accessible - small is truly beautiful in creating an environment for the promotion of ICT development. The major exception to this is government; our Isle of Man Government is perversely often harder for small suppliers to work with than larger government organisations in the UK, especially since the UK Government has implemented policies especially to enable smaller ICT companies as suppliers. Small ICT companies wishing to develop products and services for the public sector are currently disadvantaged here in comparison with across, but those wishing to supply the private sector are generally advantaged on the island in comparison with UK competitors by easier access to companies across all commercial sectors.

Once a new ICT product has been developed and demonstrated in the testbed clients, rolling it out to wider, even global markets, is relatively easy. I say relatively because of course taking product to market is never easy, but it’s much easier for ICT products than for more heavily regulated sectors such as finance and gaming. ICT is a natural export because it often doesn’t require physical shipping and can commonly be supported remotely allowing smaller businesses to establish a global footprint.

I’ve no doubt that some people would argue that we don’t have the manpower for serious ICT development, thinking that it needs big research and development teams along the lines of a Microsoft, Google or Xerox. That would be a fallacy, most ICT products are developed by small teams, even in global ICT corporations. Solo developers are uncommon in big product development, but a development team of three to nine is usually optimal, when teams get much larger they start tripping over each other and losing productivity. The reality is that we have lots of ICT development teams on the island, but in the main their product is not for sale, it’s for in-house use in our finance and e-Gaming sectors. ICT development is not unhealthy on the Isle of Man, but most is not for export and we need to change that.

ICT as an exporting business sits at the other end of the value chain to e-Business, it uses different types of people, different financing models and different business models. ICT entrepreneurs know this and when we lump ICT in with e-Business in our economic strategy and business support we give a clear message to them - the Isle of Man doesn’t understand the ICT business. That message is self-evidently not true, the success of Microgaming, PDMS, AFD and others clearly demonstrate that the Isle of Man is a good place to develop ICT products and services and has been since long before we developed our e-Business strategy. We need to stop giving ICT entrepreneurs the wrong message that we are only interested in e-Business, and start telling them that IoM PLC is open for ICT business.