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Archived Report
How Information Technology Is
Enabling the Sharing Economy

by James G. Barr

Copyright 2017, Faulkner Information Services. All Rights
Reserved.

Docid: 00021399

Publication Date: 1710

Publication Type: TUTORIAL

Preview

"Why pay through the nose for something when you can rent it more
cheaply from a stranger online?" As The Economist
reports, that simple question sums up "the principle behind a range of
online services that enable people to share cars, [accommodations],
bicycles, household appliances and other items, connecting owners of
underused assets with others willing to pay to use them." It’s a
phenomenon known as the "sharing economy" and features
already-established firms like Airbnb, which allows
homeowners to transform their houses into hotels, and Uber, which
permits car owners to function as on-demand taxi drivers. The
sharing economy is enabled – some might say driven – by a combination of
information technologies, principally, Web 2.0 online platforms,
high-speed Internet, cloud computing, mobile broadband, social media,
and collaboration.

Report Contents:

• Executive Summary
• Related Reports
• The Sharing Economy
• The IT Enablers
• Sharing Economy Analytics
• Recommendations
• Web Links

Executive Summary

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"Why pay through the nose for something when you can rent it more cheaply
from a stranger online?"¹

As The Economist reports, that simple question sums up "the principle
behind a range of online services that enable people to share cars,
[accommodations], bicycles, household appliances and other items,
connecting owners of underused assets with others willing to pay to use
them."²

It’s a phenomenon known as the "sharing economy" and features
already-established firms like:

• Airbnb, which allows homeowners to transform their houses into hotels
• Uber, which permits car owners to function as on demand taxi drivers

The sharing economy – which is also known as the "access economy,"
"collaborative economy," "gig economy," and "peer economy," is both:

• Transformative, narrowing as never before the gap between between buyer
  and seller
• Disruptive, redefining established business models and spawning legal
  and regulatory issues which remain unresolved (at least in the near term)

The sharing economy took off, not surprisingly, in the wake of the Great
Recession of 2008, in which layoffs and declining stock prices began to threaten
middle class economic security. Even without these influences, the sharing economy –
which represents the democratization of e-commerce in which individuals, not
corporations, control the electronic buying and selling process – was perhaps
inevitable as technological developments like Web 2.0 online platforms, high-speed Internet,
cloud computing, mobile broadband, social media, and collaboration combine to
create an environment conducive to one-on-one commercial – and non-commercial –
transactions

The Sharing Economy

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While most media attention is focused on Airbnb and Uber, the sharing economy
manifests in many forms and for many purposes. Examples include the
following.

Dice & TaskRabbit

Dice and TaskRabbit are both job sites. Dice allows computer and
other technicians to connect with companies offering contract or full-time
positions. TaskRabbit permits small businesses and homeowners to
connect with people willing to clean houses, run errands, assemble
furniture, and do other "day work."

eBay & Swap

eBay is a global version of the
traditional neighborhood yard sale. Similarly, Swap is an online
consignment store where people can sell and swap (barter) merchandize.

Kickstarter

Kickstarter allows artists and inventors to solicit venture capital from
ordinary citizens by aggregating small contributions into a targeted
investment fund. Kickstarter serves people and projects too small to attract
conventional start-up sources, and perfectly represents the appeal and
power of the sharing economy.

Netflix & Spotify

Netflix helps eliminate the need to buy expensive DVDs, streaming films,
television programs, and even original content direct to consumers for a low
monthly fee. Spotify performs a similar service for music lovers.

Pinterest & YouTube

Similar to Facebook, Pinterest and YouTube satisfy the desire of many
individuals to share their artistic creations or preferences through
electronic bulletin boards. Videos submitted to YouTube may be ad-supported
or form a revenue-producing "YouTube channel."

Wikipedia

Wikipedia is an online encyclopedia which was built – and is maintained –
collaboratively by the Internet community using wiki software.

The IT Enablers

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The sharing economy is enabled – in fact, relies – on a variety of
information technologies, principally, Web 2.0 online platforms, high-speed
Internet, cloud computing, mobile broadband, and social media.

Reinforcing the essential relationship between IT and the sharing economy is
Uber’s claim that the firm functions as a pure technology company, since Uber
has neither cabs nor cab drivers, just contractors willing to utilize their own
vehicles to ferry passengers from place to place – a process that wholly relies on
information technology.³

Expanding beyond its people moving mission, Uber is developing self-driving
truck technology to expedite materials transport.

Web 2.0 Online Platforms

Web 2.0 is the term generally applied to the second generation World Wide
Web, where static Web pages were replaced with more dynamic content –
content designed to permit people to share information online and
collaborate over distance. Web 2.0 fostered the development of online
platforms, which operate as foundational elements in the sharing economy.
All sharing economy "apps," from Airbnb to YouTube, are Web 2.0 online
platforms.⁴

High-Speed Internet

As with e-commerce in general, the sharing economy depends for its
viability on the availability of high-speed Internet access. Thanks to cable
and satellite providers, Internet availability is near universal in most
technologically-developed areas.

Cloud Computing

Cloud computing could be dubbed e-commerce 2.0. E-commerce as
delivered in the 1990s and early 2000s enabled enterprises to sell products
and services direct to consumers, bypassing the brink-and-mortar middlemen. With the advent of cloud computing, hardware vendors could, for the first
time, slice physical IT assets into virtual products (compute,
storage, network, etc.) and share these products over the
Internet to businesses, even individual consumers. At the same time,
software vendors could share programs in the cloud that would
normally be installed by customers on-premise.

Today, the generally recognized cloud service models are SaaS, or "Software
as a Service," PaaS, or "Platform as a Service," and IaaS, or "Infrastructure as
a Service."

• SaaS providers present participants in the shared economy with finished applications that can
  be run from the cloud.
• PaaS providers present application development "platforms" that can
  be utilized to develop (and
  even host) new applications.
• IaaS providers present pay-as-you-go computing resources, including
  processing power, storage, and even networking assets.

Mobile Broadband

The sharing economy is conducted 24×7, with buyers and sellers engaging
each other anytime, anywhere. To accommodate such spontaneity, rapid
and reliable mobile broadband access is required, as, course, are modern
smartphones.

As reported by Brookings India, "Smartphone users in the US numbered 207 million
in 2016, or 64 per cent of the total population. Smartphones now account for
79.3 per cent of the mobile market."⁵

Social Media

While not furnishing the technical nuts and bolts that undergird the sharing
economy, the technologies and practices surrounding social media provide a vital
ingredient in the sharing experience: Trust.

Consider Airbnb. "We couldn’t have existed ten years ago,
before Facebook, because people weren’t really into sharing," says Nate Blecharczyk, one of
the company’s founders. David Lee, founder and managing partner of SV Angels, an early
investor in Airbnb, adds that thanks to social media, "people are generally more comfortable meeting new
people using technology." Providing a secure platform for financial
transactions is vital, he says, but creating a trusting community is just as
important when it comes to attracting users.⁶

Collaboration

The IT industry, itself, is "sharing" in the sharing economy through IT provider-end user collaboration. As analyst Ken King observes, "The landscape of technology and software providers continues to evolve. We’re seeing the lines between inventor and consumer blur and in many cases, disappear altogether as traditional IT providers collaborate directly with end users. The model relies on an open and transparent technical and business model. Fostering a broad community of innovators and developing on open standards, ignites an endless set of options for end users. The communities developing are at essence villages of stakeholders. We’re seeing profound collaboration across multiple parties leading to shared investment, accelerated progress, and advanced innovation."⁷

Sharing Economy Analytics

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report]

While information technology has been successfully employed to enable the
sharing economy, the challenge that lies ahead is to apply information
technology to analyzing the sharing economy.

Former US Secretary of Labor Robert Reich contends that "the sharing
economy [as it pertains to part-time employment] will be our undoing." Reich argues that:

• "The upsurge in uncertain work makes the old
  economic measures – unemployment and income – look far better than Americans
  actually feel.
• "[Uncertain work] also renders irrelevant many labor
  protections such as the minimum wage, worker safety, family and
  medical leave, and overtime – because there’s no clear ’employer.’
• Finally, uncertain work "eliminates
  employer-financed insurance – Social Security, workers compensation,
  unemployment benefits, and employer-provided health insurance under
  the Affordable Care Act."⁸

Beyond employment measures and issues involving benefits, there is some
skepticism about basic metrics like pay. Uber, for example, commissioned a report which
asserted that drivers in major American cities such as Los Angeles and
Washington, DC, were averaging more than $17 an hour. However,
investigative journalist Emily Guendelsberger discovered that drivers in Philadelphia, a fairly typical
Uber city, are probably earning only a fraction of that amount,
around $10 an hour after expenses.⁹

Importantly, the next great IT enabler of the sharing economy must be
"sharing economy analytics."

Recommendations

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As summarized by Brookings India, "In
the broadest sense, the sharing economy represents a transformation of products,
once bought outright by consumers, into services that can be accessed on demand.

"[Economist]
Michael Munger observes that ‘people don’t fundamentally want stuff. What
they want is the stream of services that stuff provides over time.’ [As
Munger explains], ‘I want a hole in the wall, not the power drill itself.’

"Wanting
the service that the product offers would lead someone to rent that product for
a short period of time. Until recently, the transaction costs of sharing goods
for short periods of time between peers were greater than the costs of buying
them outright. Peer-to-peer sharing makes the most sense for expensive,
underutilized items like cars and spare rooms."¹⁰

From an enterprise perspective, the continuing evolution of the sharing
economy offers three significant opportunities:

1. Partner with Existing Shared Economy
Firms and Make Them Better

For example, as reported by The Econimist, "GM Ventures, the investment arm
of America’s biggest carmaker, was among the investors who put $13 million into RelayRides
in 2011. RelayRides was given privileged access
to GM’s OnStar navigation system, which is installed in [millions of] American cars. The sign-up process for RelayRides has been streamlined for OnStar users,
and OnStar-equipped cars can be locked and unlocked by renters using an app,
so there is no need to meet to hand over keys."¹¹

2. Embrace the ‘Buy to Share" Business Model

According to analyst Christopher Mims, "Increasingly, the goods being
‘shared’ in the sharing economy were purchased expressly for
business purposes, whether it’s people renting apartments they can’t
afford on the theory that they can make up the difference on Airbnb,
or drivers getting financing through partners of ride-sharing
services Uber and Lyft to get a new car to drive for those same
services."¹²

Since enterprises have "deeper pockets" than individuals or small
businesses, they can invest more money in sharable commodities like cars and
apartments and realize greater income from sharing.

3. Become a Cloud Provider or Expand Your Cloud Offering

For information technology providers, cloud computing is not only a shared
economy enabler but a shared economy destination, especially for current and
would-be SaaS providers. A report from Juniper Research, "Cloud
Computing – Enterprise Markets: SaaS, PaaS & IaaS, 2014-2018," forecasts
that revenues generated from enterprise Software as a Service will reach $53.5
billion in 2018, representing 59 percent of the enterprise public cloud
computing market, rising from $23.2 billion in 2013.

Web Links

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US National Institute of Standards and Technology: http://www.nist.gov/

References

¹ "Collaborative
Consumption: Technology Makes It Easier for People to Rent Items to Each Other.
But As It Grows, the ‘Sharing Economy’ Is Hitting Roadblocks." The Economist.
March 9, 2013.

²
Ibid.

³
"Uber, Airbnb and Consequences of the
Sharing
Economy: Research Roundup." Journalist’s Resource. July 13, 2015.

⁴ "The Sharing Economy:
Will This Be the Future?" Information Strategy.
September 14, 2015.

⁵ Niam Yaraghi and Shamika Ravi. "The Current and Future State of
the Sharing Economy." Brookings India IMPACT Series No. 032017. March 2017:10.

⁶

"Collaborative
Consumption: Technology Makes It Easier for People to Rent Items to Each Other.
But As It Grows, the ‘Sharing Economy’ Is Hitting Roadblocks." The Economist.
March 9, 2013.

⁷ Ken King. "What the Sharing
Economy Can Teach
Information Technology." Forbes. April 6, 2016.

⁸ Robert Reich. "The Sharing
Economy Will Be
Our Undoing." Salon. August 25, 2015.

⁹ Christopher Mims. "How
Everyone Gets the ‘Sharing’ Economy Wrong: Uber Isn’t the Uber for
Rides—It’s the Uber for Low-Wage Jobs." The Wall Street Journal. May 24, 2015.

¹⁰ Niam Yaraghi and Shamika Ravi. "The Current and Future State of
the Sharing Economy." Brookings India IMPACT Series No. 032017. March 2017:11.

¹¹ "Collaborative
Consumption: Technology Makes It Easier for People to Rent Items to Each Other.
But As It Grows, the ‘Sharing Economy’ Is Hitting Roadblocks." The Economist.
March 9, 2013.

¹² Christopher Mims. "How
Everyone Gets the ‘Sharing’ Economy Wrong: Uber Isn’t the Uber for
Rides—It’s the Uber for Low-Wage Jobs." The Wall Street Journal. May 24, 2015.

About the Author

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James G. Barr is a leading business continuity analyst and

business writer with more than 30 years’ IT experience. A member of

"Who’s Who in Finance and Industry," Mr. Barr has designed,

developed, and deployed business continuity plans for a number of Fortune

500 firms. He is the author of several books, including How to

Succeed in Business BY Really Trying, a member of Faulkner’s Advisory

Panel, and a senior editor for Faulkner’s Security Management

Practices. Mr. Barr can be reached via e-mail at jgbarr@faulkner.com.

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