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2016: the year of AI

We recently published an article about computers stealing our jobs; already one of the key phrases of 2016 is AI (artificial intelligence) Mark Zuckerberg, creator of Facebook, having had a new baby, is obviously looking for a new hobby and has announced that his challenge for 2016 is to build his own robot butler. “You can think of it like Jarvis in Iron Man,” he said.

Predictions are hard, particularly in digital technology, where the next big thing can appear from nowhere, but market-research firms all stick their necks out at the end of each year on where the technology industry is headed.
IDC, one of the biggest such research firms, was early in identifying the shift to what it calls the “third platform”. The first platform for IT was the mainframe computer—a big, centralised processor with lots of dumb terminals connected to it. The second platform, which became dominant in the early 1990s, was the client-server model, in which processing power was divided between more slimline central “servers” and the PCs on workers’ desktops. The third platform is based on the online computing “cloud” and its interaction with all manner of devices, including wirelessly connected ones such as smartphones, machinery and sensors (known collectively as the “internet of things”). These devices will suck up unprecedented amounts of “big data”, which will need artificial-intelligence, or “machine learning” software, to pluck the useful insights out of it.

All these buzz-phrases are becoming increasingly familiar even among non-tech types. IDC’s main prediction for 2016 and 2017 is that in this period, the move into the cloud will become mainstream among businesses. By the end of it, IDC believes that two-thirds of firms’ software applications will be hosted somewhere else, along with most of their data. Increasing numbers of businesses will rent their processing power and data storage from a cloud-computing provider. Some will keep things in-house, but build their own “private cloud” in which much processing and storage is once again centralised, as in the mainframe era, but with lots of data transmitted through wireless-internet connections.

In an interview with the Economist, Frank Gens, IDC’s chief analyst, said the majority of the world’s 2,000 largest companies will be moving towards a business model in which data collection and processing is no longer a peripheral activity but the thing that their competitive edge is built on: think of power utilities earning revenues from helping clients manage their buildings’ energy use, or banks retaining customers by helping them to ward off online fraudsters. Forrester, another big tech-research firm, makes a similar prediction for the coming year: that as online-security breaches and identity-theft scams intensify, the protection of personal data will become an important selling-point for many services.

This intensifying focus on data usage and analysis means that there should be loads of jobs for software coders: IDC says that as big firms leap on to the third platform, they more than double their programming staff. Firms that provide streams of online data, on everything from weather to traffic to pork-belly prices, will also do well: IDC says that firms making the third-platform leap in the coming two years will typically treble, at least, the number of such data providers they use.

However, many providers of hardware and software from the “second platform” era will go the same way as long-forgotten mainframe builders. By 2020, predicts IDC, a third of today’s IT companies will no longer exist in their current form, swallowed up in a wave of mergers and takeovers. And although demand for cloud computing will soar, many smaller contenders will fall by the wayside. Within five years the market will be dominated by perhaps half a dozen global giants, from American ones such as Amazon and Microsoft to Chinese ones like Alibaba.

Gartner is the most daring among the big IT-research outfits. It predicts that the coming year will see the advent of the “fully programmable economy”. Intelligent software agents already make many economic decisions, such as when to buy or sell a particular share or bond. But these do not yet act completely on their own, the firm’s analysts explain. Although in the past year the buzz about “robo-advisers”—computer-generated financial advice—has faded somewhat, Gartner says the next generation of such products will be competitive with the traditional offerings of banks, insurers and brokers.

By 2020, Gartner reckons, autonomous software agents outside of human control will participate in 5% of economic transactions. By 2018 more than 3m workers globally will be supervised by a robo-boss”, a program that tracks their performance, and 2m will be required to wear health and fitness trackers (which thousands of top athletes already do). One-fifth of “business content” will be authored by machines, including market reports, press releases and the like.

It may still be a while before software can replace the IT pundits and make these sorts of bold predictions itself. But the destination seems clear: information technology is increasingly turning into “business technology”, in the words of George Colony, Forrester’s chief executive. As a result, many more firms, whether they make things or provide services, will turn into tech companies. If you hear tech pundits waffling on about “digital transformation” in 2016, this is what they are talking about.

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