Classroom Companion: Business

Notation
Digital data
Analog data
. Fig. 1.7 Evolution of digital data storage and communication. (Authors’ own figure)
 
Chapter 1 · The Digital Economy

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It is the combination of digitized data, fast communication networks, and mass 
storage that empowers the digitization of the economy. The business plan of, for 
example, Facebook requires that all data (text, images, and video) exist in digital 
format, that there is a worldwide digital communication network attaching the 
users to the platform, and that there is enough mass storage capacities to store all 
user data.
The advances in microprocessors and mass storage of digital data have resulted 
in the evolution of digital devices with fast processing and cheap storage capabili-
ties. Today’s smartphones have the same processing power as supercomputers had 
20 years ago. While 20 megabytes was the standard storage capacity of home com-
puters in 1995, the storage capacity of smartphones 20 years later is more than 100 
gigabytes, that is, 5000 times bigger. The cost of storage has shown similar trends. 
The cost of one gigabyte of storage in 1995 was about $1000. Twenty years later, in 
2015, the same amount of storage cost $0.02. This evolution is a result of the pack-
ing density of transistors on microchips which has doubled every 2 years since the 
early 1970s (Moore’s law). The quality and inflation-adjusted price of information 
technology equipment has decreased on average by 16% per year from 1959 to 2009 
(Nambiar & Poess, 
2011
). Moreover, network capacity increases and cost of opti-
cal fibers decreases following similar laws.
Currently, there is no end to the increase of data produced, stored, communi-
cated, and processed. The most significant increase is expected to arise from IoT 
applications. By 2020, it is estimated that there will be more than 50 billion IoT 
devices connected to the Internet—more than four times as many as in 2017 
(Nordrum, 
2016
).