Is Information Technology the new middleman?
Let’s start by showing some love to the much berated middleman. Middlemen, throughout the ages, have done an important job by bringing two sides of demand and supply together. They have done this in a variety of manners by facilitating transactions, helping spread of goods (and sometimes ideas and diseases) from one place to another, creating a two-way dialog between buyer and seller (hence matching supply to demand), and sometimes breaking bulk to meet customer needs. Development of these middlemen allows goods to be produced at the best suitable location and not just co-located with consumption spots. Middlemen receive a charge (percentage or absolute value per transaction) for enabling this trade between seller and buyer. Because they control flow of goods as well as information, they are in a unique position to exploit the two parties and this has been the cause of bitterness and acrimony towards them if they have exceeded rational(?) expectations.
As the world moves from a goods/manufacturing economy to a service economy, current trade is as much about flow of information as it’s about flow of goods. This shift from goods to services is giving rise to a new middleman — Information Technology (IT).
Since the phrase, Information Technology, is being used in multiple ways we will imply distribution and processing of data when we are evaluating IT as the middleman here. We are not referring to the infrastructure (network, computers, etc.) or the binary digital numbers. The purpose of this elimination is not to fit the model/thinking to prove our arguments but to use particular aspect/definition of a word which recently has evolved to mean different things to different people.Other option of coining a new word/phrase would be equally suboptimal.
Here are few arguments whether IT is the new middleman:
- Needs buyer and seller: A middleman by definition serves as a bridge between buyers and sellers. It does not create its own demand/product and is also not its own consumer. In similar manner, IT needs parties who provide input and parties who access output. People/machines that add value beyond aggregating/breaking-bulk by creating something new out of the inputs received e.g. raw materials to finished goods; raw data into insights are not middlemen
- Facilitate transactions: Like a middleman, IT is helping facilitate transaction between two parties by providing a new means of communication as well as by delivering the goods (services in this case). This ranges from software applications to monetary transactions
- Aggregator: IT can source information from multiple sources, aggregate and distribute it per needs of the buyer e.g. search engines, voice assistants and analytical platforms. This also helps match the mismatch between input (seller) and output (buyer) requirements. Key distinction to remember is that like a middleman they don’t change characteristics of the goods/services
- Lower costs: By appropriately matching requirements of both sides it minimizes the mismatch between demand and supply, which reduces waste, supports appropriate production and hence lowers costs. IT is serving many such functions by improving visibility, reducing delays/lag time, and lowering cost of transactions.
- Not a Merchant: One area where IT differs from traditional middleman is that it does not take title of goods (legalese for ownership) and is merely a custodian of the data
One can argue that currency plays some of these roles by facilitating transactions and is it a middleman as well. Currency helps barter of goods between two parties who have dissimilar set of goods to offer in exchange for their requirement e.g. I’ve silk to offer but I need spices, while other person may have spices but needs cattle. However, currency itself is the good being transferred and not just a mechanism to transfer goods from seller to buyer.
How do you see IT (as defined above) and technology broadly taking up bigger, broader and newer roles in today’s economy?