Innovation Economy V3

‫‪11/11/2008‬‬

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‫‪WIKIPEDIA‬‬ ‫‪STKI‬‬ ‫מתוך ויקיפדיה‪ ,‬האנציקלופדיה החופשית‬

‫חברת ‪STKI - Schwarzkopf The Knowledge Integrators‬‬ ‫היא חברת ייעוץ בתחום מערכות מידע בישראל‪ ,‬המפעילה צוות‬ ‫טוח‪,‬‬ ‫ם‪ ,‬חברות ב‬ ‫כוללים בנק‬ ‫ם‪ .‬לקוחות החברה כולל ם‬ ‫של אנל סט‬ ‫ביטוח‬ ‫בנקים‬ ‫אנליסטים‬ ‫משרדי ממשלה‪ ,‬חברות היי‪-‬טק ותעשייה‪ ,‬חברות טלקום ועוד‪.‬‬ ‫באמצע שנות ה‪ ,80-‬ד"ר ג'ימי )חיים( שוורצקוף ביצע את‬ ‫המחקר הראשון מסוגו אודות שוק טכנולוגיית המידע בישראל‪,‬‬ ‫עבור חברת ‪ .DEC‬המחקר הכה גלים בשוק הישראלי‪ ,‬ונתן‬ ‫תמונת מצב קונקרטית בשוק שהיה עד אותה עת בלתי ממופה‪.‬‬ ‫ד"ר שוורצקוף המשיך בחקר השוק ובשנת‪1992‬הקים את חברת‬ ‫‪ ,Meta Group Israel‬ששימשה כנציגות בישראל של חברת‬ ‫‪ Meta Group‬העולמית‪ .‬במסגרת החברה‪ ,‬המשיך ד"ר‬ ‫שוורצקוף לפרסם מחקרי שוק בתחום באופן קבוע‪ ,‬וכן לספק‬ ‫ייעוץ לחברות והארגונים המובילים בשוק‪ .‬בשנת ‪ 2004‬נרכשה‬ ‫‪ Meta Group‬העולמית על ידי חברת גרטנר‪ ,‬וד"ר שוורצקוף‬ ‫והאנליסטים המשיכו בפעילותם בישראל תחת השם ‪.STKI‬‬

‫‪Innovation Economy:‬‬ ‫‪Resist the hype but don’t ignore the realities‬‬

‫‪Dr. Jimmy Schwarzkopf‬‬ ‫‪Research Fellow‬‬

‫‪STKI‬‬ ‫‪1‬‬

‫‪[email protected]‬‬

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Inviting you to my office 

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and to my library.........

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This presentation is dangerous: will make people think  about  intelligence and wisdom (two very different things)

• Evariste Galois (1811‐1832) – accepted a duel with pistols.  – spent the night before the duel in  writing down his mathematical  testament: theory of  transformation of roots in  algebraic equations.

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If I could have predicted this ??

So: I cannot “predict” any one in particular  but…..

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Exponential Growth in logarithmic plot 

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What has happened in 2008 and what can I do? Is there a difference between economic cycles caused by: 1. Technology changes

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15 www.KurzweilAI.net

Prof. Prescott and Prof. Kydland  • "contributions to dynamic macroeconomics: the  time consistency of economic policy and the  driving forces behind business cycles"

2. Credit mismanagement

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• Forces behind business cycles: – Technology for converting inputs of  T h l f ti i t f capital and labor into output of goods   (technology for creating value) – Technological change Sveriges Riksbank Prize Economic Sciences Alfred Nobel 2004 All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Economic progress takes place by overlapping surges DRIVEN BY SUCCESSIVE TECHNOLOGICAL REVOLUTIONS

FIVE TECHNOLOGICAL REVOLUTIONS IN 230 YEARS

Technological progress

Time

40-60 years

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Prof. Joseph Schumpeter 

PROF. THOMAS KUHN • we do not advance in steady, even progress but in a series of peaceful interludes punctuated by violent revolutions, revolutions • each conceptual world view is replaced by another

• Suggested that Economies are  Driven by “Creative Destruction” • Shifts the Focus of Economics from  Price Adjustment to Innovation • Financial Innovation Tends to  Fi i lI i T d Produce Sectoral Bubbles • Bubbles Tend to Eventually Burst • The Fallout from Bursting Bubbles  Often Threatens to Trigger an  Economy‐wide Recession

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TWO DIFFERENT PERIODS IN EACH GREAT SURGE  INSTALLATION PERIOD

‘Creative destruction’ Paradigm shift

Turning Point

Institutional recompositio on and role shift

Degree of diffusion of the technological revolution

DEPLOYMENT PERIOD

Kuhn’s “boom” Reaping of growth and social benefits from the prevailingSchumpeter’s paradigm Creative

destruction

Next big-bang big-

big--bang big

2O - 30 years

???

2O - 30 years

Austrian‐School  credit cycle theory • Ineffective central bank policies tend to "artificially" set interest  rates too low for too long, resulting in excessive credit creation,  speculative "bubbles" and "artificially" low savings. – Low interest rates tend to stimulate borrowing from the  banking system.  monetary boom – Leading to an unsustainable  Leading to an unsustainable "monetary boom" during which  during which the "artificially stimulated" borrowing seeks out diminishing  investment opportunities.  – A correction or "credit crunch" – commonly called a  "recession" or "bust" – occurs when this credit creation  cannot be sustained. 

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Recurring phases of each great surge

The changing face of the last 100 years

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During the deployment phase: unprecedented opportunities and new business models

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Prof. Carlota Perez :  TECHNO‐ECONOMIC PARADIGM SHIFTS

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Which road should we take ?

directions of the  current paradigm shift

Alice came to a fork in the road. “Which road do I take?” she asked. “Where do you want to go?” responded the Cheshire cat. “I don’t know” Alice answered. “Then” said the cat, “it doesn’t matter”.

Lewis Carroll, Alice in Wonderland

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FEATURES OF THE CURRENT PARADIGM SHIFT “SERVICES”

Reinvest in human capital

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Prof. Israel Kirzner • Into a world of men unable to learn… introduce  a group of outsiders who are able to perceive  opportunities …where a good can be sold at a  price higher than that at which it can be  brought.  • This group of entrepreneurs…notice profit  opportunities that exist because of the initial  ignorance of the original market participants  and that have persisted because of their  inability to learn.  All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Assumption : Generation C is here 

from BUILD product to CREATE service

Co-Creators Control

Cash

The birth of Generation C (T people) Communicate

Blue Ocean Strategy Create uncontested market space.

Beat the competition.

Make the competition irrelevant.

The New Economic Age

Connected

Creativity Content

Red Ocean Strategy Compete in existing market space.

Creative Class

Conversation Community Channel

Exploit existing demand.

Create and capture new demand.

Make the value-cost trade-off.

Break the value-cost trade-off.

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

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So what do we do in the “New Era” ? 

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Service : A Definition

Shift to a solutions economy From product to service What are customers trying to solve? “Less stuff… more service”

• Cultural change: From product to service. • Service is produced and consumed at  customer site and delivered by people. • A service is a series of activities that  normally take place in interactions  between the customer and supplier  (employees, physical resources, goods  and/or systems), and which are provided  as answers to customers' needs. All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Example: Suppliers of components with  added‐value  

Competition in services? better processes 

• Suppliers deliver more than a product, they  deliver a service: – – – –

involvement in design phase of final product order process delivery in‐time and accurate d li i ti d t invoice process

• The quality of the whole process is relevant,  not only the quality of the delivered  components. All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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SERVICE ECONOMY pushes need for “new CIO”

Innovation

Ray Kurzweil

BUSINESS PROCESSES

Time 43

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Moving from PRODUCT to a SERVICE ?

“I’m an inventor.   I became interested  in long term trends  because an  invention has to invention has to  make sense in the  world in which it is  finished, not the  world in which it is  started.”                      ‐ All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

Cloud Computing Modularity

• Represents a change in BUSINESS MODEL ?

Desktop as a service

• Represents a “disruptive” change ?

Software as a service (standard applications)

YES

Platform as a service (custom applications)

CLOUD COMPUTING and SOA are basically new  “disruptive” ways of delivering IT

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Wisdom of Clouds : "cloud computing"  "cloud computing"  What's revolutionary is not cloud computing itself but how the pieces have come together to make doing business in the cloud seem increasingly like an economic inevitability Cloud computing Cl d Your Text here ti is i a simple i l concept: t

What is Cloud Computing? 1. data and services reside in massively scalable data centers 2. accessed from any connected devices over the internet.

Your Text here

• Software and services are delivered over the Web and through a browser. • No servers or client software to install. • Available anytime, anywhere, from any device connecting to the Internet 4+ billion phones by 2010 All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Web 2.0enabled PCs, TVs, etc.

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Businesses, from startups to enterprises

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Cloud Computing Architecture Apache

Virtual Machine

Virtual Machine

Virtual Machine

Virtual Machine

Monitoring Agent Open Source Linux with Xen Data Center – 64 bit X86 Provisioning Baremetal & Xen VM

Monitoring

Monitoring

DBMS

Provisioning Manager

Virtualized Infrastructure based on Open Source Linux & Xen

Application Server

Management Stack 50

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History of Innovation 

51

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Computing and Communication Technologies  Evolution: 1960‐2010!

Some background Cloud   Computing Your Text here

Your Text here

Centralised

Decentralised Control

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Disruptive technologies • Introduction of the IBM Mainframe ( 1960’s)

• Introduction of the Apple II (1978), IBM PC (1981), TCP/IP (1980’s), C/S  Architectures  (1980’s), SUN workstations (1980’s), Internet (1990’s)

11/11/2008

Books of the 1980‐90s -” No institution can possibly survive if it needs geniuses or supermen to manage it. it It must be organized in such a way as to be able to get along under a leadership composed of average human beings”Your Text here

• Open Source (2002); Introduction of XML‐based Composite Applications (2006),  Service Oriented Architectures (2005), Virtualized Infrastructures (2004),  Web2/internet 2 (2007), Cloud Computing (2008), METAweb (2008) 

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Your Text here

“It is the means by which [organizations] create valueproducing resources or endows existing resources with enhanced potential for creating value”

“The customer rarely buys what the company thinks it is selling him” 56

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BOOK OF 2003

BOOK OF THE 1990’s • Introduced the business world  to rethinking operations.  • Demonstrated how process  redesign can yield  breakthroughs in performance  breakthroughs in performance • Put the word "reengineering"  into the English language.

copied: “The Myth of Real Time Information”, HBR 1966

Plus 10,000 rebuttals And 20+ books

Plus 2000+ rebuttals And 5 books

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Book of 2005 • Thomas Friedman – 3 billion people (consumers & producers)  entered the world economies • Eastern Europe (ie: Rumania) • Asia (ie: China, India)

– Now we have a “new” economy: • • • • •

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Book of 2008 • Stephen Baker introduces us to the  mathematical wizards who are digging  through our data to decode us as  patients, shoppers, voters, potential  terrorists—even terrorists even lovers. lovers. • translate the complexity of highly  intelligent knowledge workers into the  same types of equations and algorithms  that are used to fine‐tune shipping, sales  and other BI applications.  All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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A process of mutual shaping  in a constantly changing context

Math based word cloud

TECHNOLOGY

SOCIETY

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Maslow’s hierarchy of needs

Access Proliferation

• • • • • •

• • • • • •

Video games Email XBox LIVE Websites IM Search

Radio DVD Ring Tones TV Blogs Magazines

• • • • • •

Satellite Radio TiVo (Starhub PVR) Video On-Demand Newspapers Podcasting Cell Phone

Source: Darwin Day Conference, Google

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and the effect on IT…….

The Peopleware Ecosystem Identity Management WCM

Wireless

Composite App. Framework

Security

SSO

Application Servers

Expertise Location & Mgmt. Collaboration

EAI Web Services

Peopleware

BPM E-Forms/Workflow

BAM Directory E-Learning

Search

Development Tools All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

Business Intelligence DM

Knowledge Mgmt.

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Infrastructures influence the new T person 

OLDENBURG:  how infrastructure…

• infrastructure makes it possible  for people to work where they  want, when they want, how they  want • SIX  abilities needed: 1. 2. 3. 4. 5. 6.

Time is primarily spent in : • First (home) place: isolated • Second (work) place: isolated • Third places : neutral public space to connect and establish bonds.

Big Changes now:

Design – Beauty and uniqueness  Story – More than mere facts  Symphony – Seeing the big picture  Empathy – Understanding others  Play ‐ Enjoyment  Meaning – Fulfillment 

Your Text here

Your Text here

• Between 1990-2006: people went to anonymous locations such as malls • Starting in 2007: good third place makes admission free or cheap (the price of a cup of coffee), offers comforts, is within walking distance and draws a group of regulars.

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Defining the new world T PERSON = Neo‐nomad 

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Prof. Ragnar Frisch • Willingness of people to  substitute as well as their ability  to substitute. • One decision that people must  make is: k – how to allocate their time  endowment, which is the most  precious resource an individual  has. Sveriges Riksbank Prize Economic Sciences Alfred Nobel 1969 All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9  790 7000 www.stki.info

Neo‐nomads :  new Bedouins flourishing in  the coffeehouses of central Israel • A new breed of worker, fueled by  caffeine and using the tools of  modern technology • They are typically armed with  laptops and cell phones paying for laptops and cell phones, paying for  their office space and Internet  access by buying coffee and muffins • This neo‐nomads see themselves  changing the nature of the  workplace, if not the world at large.  All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Nomad Worker (2008) vs.  Paris Existentialist (1950s) Tel-Aviv geek with earphones and laptop in Arcaffe (2008) • simultaneously cramming for exams, napping, instantmessaging, researching, reading and discussing, listening to music, browsing and e e-mailing mailing Your Text here

Paris existentialist watching the world go by at the café Les Deux Magots (1950s)

Your Text here

• puffing a Gitane, napping and jotting down notes about being and nothingness All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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2007:   the year of my discovery 2007 :   the year of my discovery

An example:  my romantic attachment to my “GPS”

• “SACRED ORDER OF THE EXTERNAL MIND” I could outsource mental tasks Life is a math problem and I have a calculator

GPS

• MAGIC OF THE INFORMATION AGE Not that it allows us to know more It really allows us to know less

• EXTERNALIZE GEOGRAPHIC INFORMATION FROM MY  BRAIN • OUTSOURCE  MAP READING SKILLS • ALLOW CALCULATION OF DRIVE TIME  73

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I have outsourced  outsourced  part of my life  to external cognitive servants external cognitive servants:

Pinpoints a supermarket in MEXICO ? my son is calling from there

• No longer need a  memory – Google – Yahoo – Wikipedia

• Personal Information – Smartphone tells me  about birthdays, phones,  addresses

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• Musical taste: – ITunes

• Books and others: – Amazon

• Social Capital – LinkedIn – Xing – Facebook

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Jimmy’s Touch Points Blog Sites

Music Sites Reads his friend’s postings

Reads up on new cd releases

Movie Sites

Downloads Songs

y tickets Buys online

Sports Sites Gets the latest updates on favorite teams

Gaming Sites Looks for information about Nascar games

Checks scores

Google.com Searches for “what’s cool”

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And with access to these tools I can answer  ANY question in less then 30 minutes Banks Insurance Travel “Amazon” “e‐bay”

YOUtube Slideshare Blogs Newspapers WIKIPEDIA

Transaction Sites

Multimedia Sites

Business  Simulations Training Second Life Sales Game Sites

Average person: 10‐15 intimate 150 social 500‐1500 weak  links

Social Sites

Websites can  no longer be  islands

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Is it a coincidence or someone is playing with us

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Users want  bridges  elsewhere

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How do they happen…..

1) Google's dissemination of old United Airlines news resulting in a precipitous UAL stock slide 2) Google stocks appeared to fall off a cliff during the final few minutes of trading last week(Silicon Alley Insider has a minute-by-minute breakdown), plummeting from more than $400 per share to around $200. Luckily, it turns out Nasdaq is declaring a “do-over,” canceling all trades above $425.28 or below $400.53. Nasdaq blamed the drop on “erroneous orders” that were “triggered by orders routed from another exchange.” So it has reset Google’s closing price at $400.52, up more than 5 percent from the day’s open. 3) Other news follows Google-related stock gaffe, during which Google Finance’s data was incorrect for more than 12 hours. hours 4) Apple stock briefly took a dive Friday after a CNN iReport post appeared saying Steve Jobs had had a major heart attack. Apple said the story was false. Stock prices fell as much as 5.4 percent before rebounding, according to Bloomberg. UPDATE: Here's CNN's official statement. CNN says it removed the story because the community brought the story to its attention. Importantly, CNN also refers to the content as "fraudulent," which is much stronger than "inaccurate." The SEC has already launched an investigation.

What happened? In all cases: systems unchecked by human beings made a mistake resulting in massive damage to an already fragile market. What else can we expect???????????? But the episodes aptly illustrates how jumpy the markets are and how easily they could be manipulated. Posted by Dr. Jimmy Schwarzkopf All Rights Reserved @STKI    Moshav Bnei Zion, Israel  + +972 9 790 7000 www.stki.info

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A powerful global conversation has begun • Through the Internet, people are discovering and  inventing new ways to share relevant knowledge  with blinding speed. • Networked markets are beginning to self‐organize  faster than the companies that have traditionally  served them. served them.  • As a direct result and thanks to the web, markets  are becoming better informed, smarter, and more  demanding of qualities missing from most business  organizations.  • markets are getting smarter and getting smarter  faster than most companies All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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“A Pattern Language”, Christopher Alexander Each pattern describes a problem that occurs over and over again in our environment Then describes the core of the solution to that problem, in such a way that Your Text here you can use this solution a million Your Text here times over

Without ever doing it the same way twice 83

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Social Technographics™ 

Companies wake up !!!!!!!

Josh Bernoff, co‐author of Groundswell

Customers are: • • • •

writing about products on blogs recutting commercials on YouTube defining companies on Wikipedia ganging g g g up p in social networking g sites Your Text here like Facebook

JOSH BERNOFF

CHARLENE LI

Your Text here

MOST COMPANIES SEE IT AS A THREAT

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METAweb

METAweb METAweb phenomenon (fi-nom-uh-non) noun -noun 1. a rare or significant fact or event in the web that happened in 2007 2. something that is impressive or extraordinary that happened in 2007 87

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http://labs.google.com/

Google versus ??? Humanity emits the data (words, pictures, clicks, and searches are the raw material) Handful of cloud-wielding Internet giants like Google, Yahoo! or Amazon.com transform the info into insights, services, and, ultimately, revenue. Your Text here

Your Text here

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Cloud Computing 

Why does it bother me ?

A. IBM Introduces 'Blue Cloud' Computing CIO Today ‐ Nov 15 2007 B. IBM, EU Launch RESERVOIR Research Initiative for Cloud Computing IT News Online ‐ Feb 7 2008 C. Google and Salesforce.com in cloud computing deal Siliconrepublic.com ‐ Apr 14 2008

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Google 10 years of innovation Core Search

1995

1998

Ads

2000

Monetization

2003

Communications

2004

Collaboration

2005

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Google ad

?

?

2007

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Open for Business

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Internet 2  is not  Web 2

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Internet2: 2.4 Gbps plumbing

WEB 2  WEB  2 are WEB   are WEB  Technologies

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Leveraging the Web for  Measureable Business Results

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In 2010: all new WEB experience Soon each website will become a 3 dimensional room that can be experienced alone or with friends

• Gone are the days when  merely having an online  presence was a  business breakthrough. • Today's companies  MUST leverage the  power of the Web if  they're to gain and  maintain a competitive  advantage.

Your Text here

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Your Text here

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Ramona:  first live virtual performing recording 

artist.

Create your own virtual space Chat and interact with your friends in rooms you design Express yourself Customize your avatar and stream personal photos and video Add your room to your site Invite your friends to chat and help decorate All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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Second Life is the  biggest virtual world 40,000 concurrency (at any time) 450,000 active users (last 7 days) 1.4 m  active users (last 2 months) 10.6 m total accounts 2 m assets created per day 35 TB of user‐created data 800,000 unique items sold or traded  per month  • 500 events per day • 15 m concurrent scripts • 10 Gbps peak bandwidth • • • • • • •

Million Square Meters of Second Life Land

Currency: Linden$ • LindeX exchange operated by  Linden Lab

US$ Spent by Users (in Millions)

– Buy: USD $.30 transaction fee  – Sell: 3.5% transaction fee

• Monetary policy

270 L$ =$1 USD US $ Exchanged on Lindex (in Millions) Total User Hours (millions)

Source: Linden Lab 111 Source: http://secondlife.com/whatis/economy-graphs

Advisory/Analyst  firms

Economy • Reuters • Banking and credit • Stock markets – – – –

SL Capital Exchange (US, 20 listings) World Stock Exchange (Australia, 15 listings) World Stock Exchange (Australia 15 listings) VSTEX (Italy, 7 listings) Ancapex (US, 3 listings)

H&R Block Island

KAWG&F (Baltimore MD CPA firm), CPA Island

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We hope that during 2009 STKI will b presentt there be th and d will ill h have it’ it’s first SUMMIT

BDO Stoy Hayward Island

Accenture

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Academia, museums, non‐profits

Business IBM

Preen Cisco

Motorati SpokesAvatar: caLLie LLi cLine Li

Preen Principal: Aimee Weber Princeton

Art Gallery

International Spaceflight Museum

Computer History Museum

Science Friday

Dr. Dobbs Life 2.0 Conference

Best Buy’s Geek Squad

H&R Block

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Government, politics and collective action

American Cancer 116 Society Relay for Life

METAweb REVOLUTION The real, long-term change is just beginning to be felt, and anyone thinking about our economic future should consider this:

US Congress – hot topic legislation

US Congress

European Community

Campaign HQs

Davos protest

• access to information is a democratizing force • makes it inexpensive and easy to collaborate and share information information. Your Text here Your Text here • even the smallest companies can now have as big a presence online as a multinational corporation

The revolution may have started in a garage in California  but it has already crossed every border moving as freely around the globe as a cloud All Rights Reserved 2008@STKI    Moshav Bnei Zion, Israel  +972 9 790 7000 www.stki.info

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