TIME: Almanac 1993/TIME Almanac 1993.iso/time/081291/0812200.000

Text File | 1992-08-28 | 11.3 KB | 232 lines

                                                                                BUSINESS, Page 44

TECHNOLOGY

What New Age?


High-tech gizmos for home and office are readily available but
underused. The Information Age just isn't all it was cracked up
to be . . . yet.

By THOMAS MCCARROLL


    About a decade ago, Reliance Insurance launched an ambitious
office-automation project with the slogan "Paper Free in 1983."
The Philadelphia-based insurer had the words emblazoned on wall
posters, coffee cups, stationery and lapel buttons. It invested
millions of dollars in information technology, including thousands
of computers, an electronic-mail system and a brand-new
telecommunications network. Managers waited for worker
productivity to explode.

    They're still waiting. Today Reliance is anything but
paper free. Memos and forms proliferate as never before.
Employees shun the computerized mail system. And productivity
gains have been nil. While the company has curtailed its
spending on automation, it has not abandoned its ambition. "It
was not a realistic goal in 1983," concedes senior vice
president Ronald Sammons, "and it isn't a realistic goal in
1993. Maybe in the year 2003."

    Reliance is not alone. Since the early 1960s, when
assorted gurus proclaimed the imminent arrival of the
Information Age, businesses and consumers have been eagerly
awaiting its coming -- and with it, the "paperless" office and
the "cashless" society. Among the techno-prophets' predictions:
home shopping, electronic libraries, personal computers on every
desk, soaring worker productivity, uninterrupted growth. As a
result, thousands of companies invested heavily in information
technology in hopes of gaining a competitive edge. Other firms,
including hardware manufacturers and software developers, placed
equally large bets on supplying the markets for home and office
automation.

    Well, the Information Age is here, but it hasn't exactly
lived up to its advance billing. While more people are working
with their heads rather than their hands, and more than a third
of the nation's $5.5 trillion GNP is generated by ideas rather
than manufactured goods, white-collar productivity is no higher
now than it was 30 years ago. The paperless office remains a
secretary's fantasy. Paper-killing technologies like electronic
mail and voice processors go largely unused -- too complicated
-- while paper-generating devices like fax machines and copiers
are used to the point of abuse. As for the cashless society,
most consumers have thumbed down such gee-whiz financial
services as electronic banking, home shopping and debit cards.

    The pot of gold at the end of the information-technology
rainbow remains elusive. Citicorp has watched close to $200
million go up in smoke since 1985. Its first major
information-service investment, a joint venture with McGraw-Hill
to supply electronic data on prices and market activity to oil
traders, flopped after a year. Earlier this year, Citi pulled
the plug on a computerized information service aimed at grocery
shoppers. Knight-Ridder lost about $50 million in a failed
home-shopping service. And in its ambitious effort to make paper
vanish, Wang Laboratories itself almost disappeared when it bet
the ranch on manufacturing expensive document-scanning and
imaging systems that nobody wanted. Says David Goulden, a Wang
vice president: "The market's been a disappointment."

    The Information Age just hasn't been able to meet
overexpectations. Some technologies have worked as promised;
others haven't. For every success story like compact discs or
Nintendo, there are fizzles like picture phones and home
computers. And in some glaring instances, the industry has been
its own worst enemy. The sale of credit information by companies
like TRW and Equifax hurt the market for automated credit
services; sleazy, heavy-breathing 900-number telephone services
created a mounting backlash against audiotext.

    A growing number of markets are reaching the saturation
point. Cable TV is available to 90% of all U.S. households,
nearly three-quarters of all homes have a videocassette
recorder, and most people who want a personal computer probably
already own one. Rampant price cutting -- a sure sign of
maturation -- is putting a squeeze on profit margins
industry-wide. In fact, the $500 billion information industry
-- which encompasses everything from the media to computer
software to telecommunications -- is in its biggest slump ever.
Gone are the go-go days of 20% annual growth. Sales peaked in
1987 but rose only 9% in 1989 and 6% last year. This year the
industry will be lucky to grow at all.

    Despite the slump, industry executives point out that the
information business is still growing faster than autos, steel
and airlines. What's more, technological improvements and new
developments keep coming. What's happening now, says David
Fullarton, president of the Information Industry Association,
is simply a transition phase: "These are merely growing pains."

    Most deflating has been the market for office automation,
the largest component of the industry. Sales of hardware and
software were good -- up 7% to $300 billion -- but not great
compared with the 18% growth during the '80s. Though the
category contains everything from laser printers and
multifunction telephones to electronic-mail systems, the staple
of office automation remains the computer. During the 1980s,
Corporate America spent about $98 billion on 57 million personal
computers.

    But have computers made workers more productive? Stephen
Roach, a senior economist at Morgan Stanley, says white-collar
productivity has been stagnant since the 1960s. By contrast,
blue-collar productivity has improved by a factor of four.
"Companies thought that by simply buying boxes they would
somehow make people work harder," says Roach. It didn't happen,
Roach discovered, largely because the technology failed to reach
the top: while back-office support jobs have been automated,
less than 10% of senior executives even use personal computers.

    Other, more exotic technologies have produced
disappointment as well. Videoconferencing has largely flopped
as a substitute for business travel because costly systems --
they range up to $20,000 in price -- have failed to transmit
clear, crisp images and audio signals. Users complain that they
are prevented from swapping notes and documents and cannot
ensure privacy. They grouse about having to leave their offices
and miss phone calls to use the special rooms set up for
videoconferencing.

    So-called smart buildings have bombed as well. Experts
predicted that companies would trip over one another trying to
move into offices where all the computer and telephone equipment
was prefurnished. They assumed that companies would pay up to
a 20% premium to rent space in offices where the temperature,
lighting and talking elevators were all smartly computerized.
The experts were wrong. Many companies preferred shopping for
their own office equipment and opposed paying extra for chatty
elevators.

    Other technologies, like electronic mail, worked as
promised but failed to overcome human habits. "E-mail" was
supposed to put an end to memos, note pads and letters. Readily
embraced by techie types, it was shunned by secretaries and
others because it proved too difficult to use. In 1988, for
instance, ice-cream maker Ben & Jerry's Homemade installed an
E-mail system to serve the 200 staff members at its Waterbury,
Vt., headquarters. But less than 30% use the system. Says
Christopher Lamotte, a B&J inventory coordinator: "There are too
many options, and every option has suboptions. It's easier to
just pick up the telephone."

    For many companies, home is where the market for
information technology was supposed to be. But consumers have
been even more resistant than businesses.

    While they have purchased audio players and video
recorders, people have by and large shunned high-tech products
and services like personal computers and electronic shopping.
While big corporations were infected with PC mania during the
1980s, households remained largely immune. There are far fewer
homes with PCs than analysts predicted, much to the chagrin of
manufacturers like IBM and Commodore. Another loser: the picture
telephone. First introduced by AT&T at the 1964 New York World's
Fair, it allows callers to see as well as hear each other. But
consumers considered the device -- at $8,000 a set -- not only
too expensive but awkward. Undaunted, Sony unveiled a less
expensive videophone using a still image but withdrew the
product in 1988 because of consumer indifference. Mitsu bishi
discontinued its Visi-Tel picture phone earlier this year,
selling the entire inventory of 38,000 phones at a deep discount
to the Home Shopping Network.

    The breakup of the Bell Telephone System more than seven
years ago appeared to place the industry at the threshold of a
quantum leap into the Information Age. But the telephone
companies were legally barred from the computerized-data
business. Last month U.S. District Court Judge Harold Greene
brought the future closer by freeing the Baby Bells to use their
phone lines to provide such services as electronic Yellow Pages
and home shopping.

    So far, the electronic-data business has had a spotty
record. In the early 1980s, for instance, a number of
home-banking services were launched; some 3 million customers
were expected to sign on. But only 100,000 households use
computer-banking services. Predicts a former customer, Katherine
Dallam, 34, a small-business owner: "The future won't arrive for
electronic banking until they find a way for you to make
withdrawals and deposits from home." Other failures include
ventures backed by Times Mirror, Chemical Banking and Time Inc.
With their advantage in size and experience in selling
over-the-phone services, the Baby Bells are convinced they will
succeed where others have failed.

    But the real explosion in electronic services may have to
wait until U.S. homes are rewired with hair-thin fiber-optic
cables that can carry hundreds of times as much information as
old-fashioned copper cable. So far, the fiber-to-home project
has been bogged down in Washington politics. The technology
exists, but the question is, Who pays? It will cost an estimated
$150 billion to $500 billion to rewire America. Regulators have
opposed phone-industry attempts to stick ratepayers with the
bill. Cable-television companies, meanwhile, are also overlaying
their old networks with optical fiber. With fewer restrictions
on who picks up the tab, cable-TV concerns could rewire more
homes than the telephone industry.

    Despite the plethora of problems, no one should dismiss
the Information Age as little more than a will-o'-the-wisp. It
would certainly be a mistake to repeat the glowing predictions
of the past. But it would be equally foolish to pronounce the
Information Age a hoax. If the industry is to meet its own
projections, however, it must recognize that most people are
intimidated by even moderately high-tech products -- think of
programming a VCR -- and must refine its products and services
accordingly. But all that may be just part of the Information
Aging process.