Moore’s law suggests that computing power for the same cost doubles every 2.5 years. A combination of Moore’s law and the commoditization of computer components has made it possible to buy a $500 computer today that is more powerful and portable than a similar offering that cost $2,000 just a few years ago. How does this affect planning for major IT projects?
Gordon Moore, co-founder of intel, after having observed trends in 1965 that showed that computing power increasing significantly in a short amount of time, is famous for having invented what is known as Moore’s law. Moore’s law states that every two years or so, computing power doubles, as double the number of transistors are engineered to fit into the same computer chip space. (Simonite, 2016) Coupled with increased demand and consistently increased manufacturing capacity, and the price of a computer today of a certain power will undoubtedly be significantly less expensive in the very near future. This phenomenon can have some noteworthy impacts on the planning aspects of a major IT investment of a business.
Businesses are always working to maintain or increase market share through innovation. Because computing technology increases so rapidly, businesses are more or less forced to invest in technology upgrades if they are to remain competitive. It is estimated that business technology spending in 2017 will be approximately 330 billion. (Richardson, Chengyee, Smith, 2017, p. 366) Consider a business that has automated several aspects of the customer service experience through technology, allowing them to reduce costs to such an extent as to sell a good or service at a significantly lower price than any competitor. Any business who doesn’t work quickly to catch up will likely be shoved out of the market. Amazon and its current domination of the retail industry is an excellent example of this scenario. From a planning aspect of an IT project, Moore’s law provides a blueprint indicating that a company can focus on hardware purchases at later stages of the implementation process, should the business need to invest in a significant number of servers or physical products. Odds are the hardware will be noticeably cheaper in the very near future. In regards to the value proposition stage of the IT project, a company could factor in a decreased acquisition cost of hardware when providing economic justification for the business investments. A reduced acquisition cost would lessen the payback period, reduce the net present value of the investment and increase the accounting rate of return. (Richardson, Chengyee, Smith, 2017, p. 373)
In general, Moore’s law has encouraged innovation and risk taking for businesses to invest heavily in technology. Though some would argue that we are nearing an end to the true duplication of computing power every couple of years as evidenced by a stagnation of computing power for super computers, (Simonite, 2016) rapidly increasing innovation regarding computers and their designs will likely continue unimpeded by physical limitations of micro-chips.