Report onthe Growth & Economic Impact of the IT Industry 1940-2010

The U.S. Information Technology Industry 1940-2000 Summary
All segments that comprise the information technology industry (computers, telecommunications, and software and services) have played a major role in the transformation of the U.S. economy. The computer was commercially introduced in the late 1940s and has shown the fastest rate of advance of any technology in the twentieth century. Communication technologies made large strides in the last three decades improving telephone networks with better voice quality, higher data speeds, and faster call setup times. Software, computer programming, emerged from punched cards and tape to FORTRAN, COBOL, BASIC and fourth generation languages (4GL).

For the first few decades the United States’ lead in computer and communications technology was unsurpassed. In the 1980s other countries slowly started to catch up to the state of the art. The United States’ share in total worldwide IT revenue was about 45% in 2000, Europe ranked second with a 32%, share, Asia third with 20%, followed by South & Central America with 2%, and rest of world with 1%. Worldwide IT revenue including sales of hardware, software, and services are estimated to have increased from $650 billion in 1990 to $1,500 billion in 2000.

In 1973, the U.S. Defense Advanced Research Project Agency (DARPA) started a program to develop communication protocols that would allow computers to communicate across linked packet networks. The system of networks, which emerged from this program, was called the “Internet.” The protocols developed out of this effort became known as the TCP/IP protocols (Transmission Control Protocol and Internet Protocol). In the mid 1980s, the U.S. National Science Foundation’s commitment to build NSFNET using the TCP/IP protocol contributed significantly to the acceptance of this protocol by other networking product and service oriented organizations in the U.S. and internationally. The NSF’s actions created much of the USA’s networking infrastructure. Interconnectivity among the many network organizations enabled the enormous traffic growth and Internet usage spread rapidly to all corners of the world.

The introduction of personal computers (1985) and the utilization of the Internet revolutionized the office environment. The cost of 1,000 bytes of internal memory decreased from about $5.50 in 1965 to less than $0.10 today. Internal memory access time declined from about 17.0 milliseconds per byte in 1955 to less than 0.01 milliseconds per byte and megabits of memory per chip quadrupled every three years.

Personal computer (PC) prices dropped at an estimated annual rate of about 5% since its introduction. The Internet and declining prices promoted a surge in home PC sales and more than 60% of all U.S. households have one or more PCs today. About 60 million PCs were sold in the United States in 2004 of which an estimated 40% were for the home. Utilization of computers by public schools also increased substantially since the 1980s. About 98% of all public schools are using computers in the classroom today, 90% of all public libraries provide computer access, and close to 70% of all households in the United States have a computer toady.

The U.S. IT industry matured considerably as it moved through the 1990s. More and more workers acquired new skills in computer and communication technologies and heavy investment in IT led to a period of economic growth and acceleration of labor productivity. Labor productivity in manufacturing had the highest growth with 4% per year between 1990 and 2003 followed by non-financial corporations with 2.8%. Productivity in business rose by 2.4% each year during the same period.

Information Technology Industry Growth Beyond 2000

The second half of the 20th century was characterized by the dynamic growth of computers. The 21st century will see technologies merge and computing take on a different scenario at all levels and particular also in the home. Today, the U.S. economy and national security are fully dependent on information technology and at the core of the information infrastructure is the Internet

By the end of the 20th century there were more than 100 fixed telephone lines per 100 inhabitants in the United States. Mobile phone penetration was nearing 60% and Internet penetration 70%. As we moved into the 21st century third generation networks brought new applications for mobile phone users and the number of mobile phones fostered by the increase in sales of smart phones will surpass that of fixed lines phones before long.

Close two-thirds of the Nation is now online. Use of broadband is rapidly expanding and according to U.S. Department of Commerce projections business-to-business e-commerce may exceed 500 billion in 2005. In 2003, of the high-speed lines offered by providers 64% were from Cable TV operations, 32% from telephone companies, and the remaining 4% were from various other providers such as DSL and telephone company high-speed services.

The digital home concept – devices in the home sharing digital media across a home network – has been around for some time. Interoperability of devices connected to the home network has still to be improved to allow seamless operation and access before application of this concept will take off. Recent projections, however, show home networking growing steadily at an average annual rate of more than 25% between 2005 and 2010 and smart devices and smart networks will connect everything and everyone in the near future.

Miniaturization and the need to increase computing power have been driving the IT industry since its infancy, making the technology affordable for almost everyone. This drive to innovate is ongoing and will give us a new generations of microprocessors, which are ten-times faster as today’s, and memory chips with 40 times the storage capacity, grid computing and high productivity computing (network embedded and cognitive computing systems), photonics, nanotechnologies, optoelectronics, and new chip designs and fabrication methods.

Molecular electronics (nanotechnology) is expected to solve some of the problems and information overload we are facing today in computing and telecommunications and in fields such as medicine and energy. Application of this technology has recently been seen in flat-panel displays and is projected to be utilized by sensors, optical components, laser, memory and other logic devices in the next 5 to 10 years.

Research & development promoting innovation is sponsored by the United States Government and the IT industry. The networking and information technology research and development budget request for 2005 for all U.S. Government agencies was $2,147 million. Total information technology industry R&D is an estimated $29,100 million.

THE U.S. INFORMATION TECHNOLOGY INDUSTRY

A Report on the Growth and Economic Impact of the IT Industry 1940-2010

Prepared by the Information Technology Industry Council (ITI), Washington DC

Detailed information and data on U.S. Information Technology Industry’s growth and economic impact and industry shipment/revenue forecasts to 2010 are published in the U.S Information Technology Industry Statistics Report 1960 to 2010. The report is available from the Information Technology Industry Council, Washington DC. For a detailed contents description log on to [http://www.itic.org/statistics]. The electronic version of the report can be purchased for $29.95. To order the report call (00)1-202-626-5748 or contact [email protected].