The Digital Economy Is The New "App Economy"

By February 12, 2015 Blog No Comments
The Digital Economy Is The New 'App Economy'

If there's one thing that became evident during the recent holiday shopping season it's that we're seeing a significant shift in how and where consumers shop, with mobile devices emerging as the preferred method for browsing and buying.

According to the annual IBM Digital Analytics Benchmark results, overall online sales rose 13.9 percent for the 2014 holiday season. Cyber shopping during November and December set another record high, while mobile traffic accounted for 45 percent of all online traffic. On Black Friday, for example, mobile devices accounted for one-in-four online purchases. In essence, with this increasing reliance on mobile devices, the digital economy is rapidly become the app economy.

This growth in mobile commerce is not merely an American phenomenon. In China, November 11th marks Singles Day, the largest shopping day on the planet. Last year, Chinese shoppers spent $9 billion on 11/11, or nearly 60 percent more than the previous Singles Day and three times what Americans spent on Black Friday and Cyber Monday combined in 2013. Correspondingly, banks reported a record number mobile transactions completed in China that day, powered by the IBM mainframe computing systems that provide the backbone of their IT infrastructure.

And just as this trend is not bound by geography, it is also not limited by season, as retailers and the businesses that support them are seeing the impact all year long. Nor is it limited to the retail industry, as more people use mobile technologies to interact with industries and institutions as diverse as finance, insurance, healthcare, travel and transportation, manufacturing, energy and government.

Based on what we're seeing, a couple of things become very clear. First, this growth in mobile transactions isn't going to stop any time soon. Second, this phenomenon is driving unprecedented demands on the back-end enterprise systems that must analyze, process and store all these transactions and data. Consider the following:

  • Over the last 10 years, the volume of mobile transactions per user has grown from one to 37 each day globally;
  • A single transaction can trigger as few as four and as many as 100 additional system interactions, known as the "Starburst Effect," meaning those 37 daily transactions may result in as many as 3,700 more interactions per day from a single user;
  • By 2016 there will be 2.5 billion smartphones in the world, resulting in five times as many mobile apps and quadruple the mobile transactions compared with four years prior;
  • By 2017, each mobile consumer will make about 50 transactions creating 200 to 5,000 system interactions per day, resulting in 400 billion events per day; and,
  • Speed is becoming a leading factor in driving customer loyalty, with a third of mobile consumers saying they will abandon a purchase and move to another vendor if the app lags for more than a minute.

Addressing this incredibly rapid growth of mobile transactions requires the right systems, as well as decades of experience and expertise, and a significant, ongoing investment in developing high-performance enterprise systems capable of managing this explosive transaction growth.

For more than 50 years, IBM mainframe systems have been the platform of choice for managing financial transactions and other critical data applications for virtually every major global industry because of their efficiency, reliability, performance and security. More than 80 percent of all commercial data originates on or is managed by a mainframe, and more than 55 percent of the world's transactions go through mainframes. In essence, this is a computing platform that was designed from the beginning to process transactions.

That makes the mainframe a natural choice for addressing the exploding growth of mobile data and transactions. And today, we announced the next generation of our mainframe system, the z13, designed, built and tuned specifically to address this tsunami of mobile transactions. Key innovations include:

  • Speed - with the world's fastest processor, IBM's z13 will deliver response times of less than a second for the fast, seamless transaction processing consumers demand.
  • Security - z13 can accelerate the speed of encryption by up to two times and works in concert with integrated IBM software technologies to help protect the privacy of data throughout the transaction life cycle. In this way, the z13 wraps each "Starburst Effect" transaction in a digital packet that can only be unlocked by the mainframe itself, reducing entry points that can be used to hijack data.
  • Personalization - with "native analytics" handling billions of transactions per second while analyzing data on the fly and on the mainframe, allowing companies and other institutions to better understand their constituents and better tailor products and services to them individually.

The rise of mobile has the same potential as the Internet revolution 20 years ago to affect every aspect of work, commerce and public life. With the launch of z13, we're creating the foundation for the emerging app economy.

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