There is strong demand for technologies that do the same for less money, rather than more for the same price

 

For years, the computer industry has made steady progress by following Moore`s law, derived from an observation made in 1965 by Gordon Moore, a co-founder of Intel, now the world`s biggest chipmaker. His original formulation was rather technical, and was based on the number of transistors that could be crammed onto a chip, but it was adopted as a road map by the industry, so that it became a self-fulfilling prophecy. In practice, it boils down to the following: the cost of a given amount of computing power falls by half roughly every 18 months; so the amount of computing power available at a particular price doubles over the same period.

This has resulted in a geometric increase in the processing power of desktop computers, laptops, mobile phones, any so forth. Constant improvements mean that more features can be added to these products each year without increasing the price. A desire to do ever more elaborate things with computers — in particular, to supply and consume growing volumes of information over the Internet — kept people and companies upgrading. Each time they bought a new machine; it cost around the same as the previous one, but did a lot more. But now things are changing, partly because the industry is maturing, and partly because of the recession. Suddenly there is much more interest in products that apply the flip side of Moore`s law: instead of providing ever-increasing performance at a particular price, they provide a particular level of performance at an ever-lower price.

The most

visible manifestation of this trend is the rise of the netbook, or small, low-cost laptop. Netbooks are great for browsing the web on the sofa, or tapping out a report on the plane. They will not run the latest games, and by modern standards have limited storage capacity and processing power. They are, in short, comparable to laptops from two or three years ago. But they are cheap, costing as little as £150 in Britain and $250 in America, and they are flying off the shelves sales of netbooks increased from 182,000 in 2007 to 11 million in 2008, and will reach 21 million this year, according to IDC, a market-research firm. For common tasks, such as checking e-mail and shopping online, they are good enough.

Many companies, it seems, would also prefer computers to get cheaper rather than more powerful. The recession is hurting the computers industry, albeit not as badly as the bursting of the dotcom bubble did in 2000-01, but those companies that enable their customers to benefit from the flip side of Moore`s laws and do the same for less, will be best-placed to ride out the storm. A good example of this is virtualisation: using software to divide up a single server computer so that it can do the work of several, and cheaper to run. The more powerful that machine, the more computers it can replace and the less, in effect, each “virtual” machine costs.

 

The Rise of “Good Enough” Computing

The “good enough” approach also works with software. Supplying “software as a service” via the web, as done by Salesforce.com, NetSuite and Google, among others, usually means sacrificing the

the bells and whistles that are offered by conventional software. Google Docs lacks the fancy features of Microsoft Word, for example. But hardly anyone uses all those features anyway, and Google Docs is free. Once again, many users are happy to eschew higher performance in order to save money. Even Microsoft has cottoned on: the next version of Windows is intended to do the same as the last version, Vista, but to run faster and use fewer resources. If so, it will be the first version of Windows that makes computers run faster than the previous version. That could be bad news for computer-makers, since users will be less inclined to upgrade. But they are less inclined to do so already. Moore`s law has not been repealed, but more people are taking the dividend it provides in cash, rather than processor cycles.

Culled from The Economist