Metcalfe’s law of connections will drive digital business value

Analyst Gartner has proposed that the greatest value in digital business is delivered by connecting with external partners.

Quoting Metcalfe’s law, formulated by Robert Metcalfe, the co-inventor of Ethernet, that the value of network cards is proportional to the square of the installed volume, Gartner stated: “In the digital era, the economics of connections describes the creation of value through increased density of connections.”

For the CIO, this means IT architectures should be engineered to encourage open collaboration with external partners and customers.

“Digital business significantly changes this type of value calculation that guides investment decisions,” said Gartner analyst Betsy Burton. “First, tens of billions of things will join the billions of people and millions of businesses online. Second, any of these agents will be able to play multiple roles: customer, partner, supplier, employee, competitor, or a combination of them.”

In its report, Architect Digital Business to Maximise the Value of Dynamic Economic Agents, Gartner noted that enterprises traditionally treat customers, partners, suppliers, employees and competitors in silos, as separate elements. Applications, systems, data stores, contracts and support teams are also kept silos, so the customer database, say, is managed separately from the partner database. “In the digital world, by contrast, economic agents will dynamically switch roles. A customer could be a partner, a supplier or even a competitor, depending on the context of the interaction,” the report stated.

In the report Gartner said there was a blurring of the line between customers, suppliers and competitors.

For example, the enterprise architect of a North American transport company (a B2B asset-heavy business) explained to Gartner researchers how an oil and gas company may provide fuel to the transport company (and is therefore a supplier), but also use the transport company’s services to ship products (as a customer).Likewise, a retailer may ship products via the transport company (as a customer), yet also enable other retailers to buy any unused cargo space on the same transport (partner and supplier).

“The challenge is that the transportation company has different systems, support teams and contracts for managing customers and suppliers. Therefore, it can’t get a full picture of these economic agents or turn these relationships into further business opportunities,” Gartner said.

Burton said enterprise architects will have to design a digital business architecture to support the dynamic connections between people, businesses and things.

As Computer Weekly has previously reported, unlike the networking market, which has benefited from standards such as Ethernet, IoT lacks standards, which makes interoperability a challenge.