The terms Digital Economy and Digital Transformation are terms that describe the convergence of four different forces that are changing the needs of businesses.
Before the internet, organizations required brick-and-mortar stores or phone lines to conduct their businesses. The advent and accessibility of the internet created a "critical category-formation time" opportunity for organizations. Businesses started to use the internet mainly as a storefront or display to drive people to their brick-and-mortar stores and also for advertising. Soon after, they started adding the ability to purchase things online, and companies, like Amazon, realized that they could capitalize on the economies-of-scale, product aggregation, consolidation, and recommendation, and pricing optimization that an “online store” could provide. This was the very beginning of the cloud and cloud-native applications.
But what really accelerated the “digital” needs of businesses was the appearance of mobile devices, which connected even more people to the internet. More people now had a digital presence in the internet and businesses realized that these people were a new market they could exploit.
This new market needed applications to scale to what now people call “internet scale” and paying for software licenses for this type of scalability was too expensive and prohibitive. This is where open source came to the rescue. The "power of the community" accelerated the development of open source projects via crowdsourcing and open source collaboration. Anyone from anywhere in the globe could contribute to open source projects. Likewise, Internet-scale companies, such as Amazon, Netflix, and Lyft either use open-source software or have created and contributed open source to the community. Another benefit of open source software is its adoption of subscription-type support (for organizations that require external support for the software they run in production), which is significantly cheaper than software licensing. The growth of open source fulfilled this need in the market, and companies like Red Hat, purveyors of open source software, have succeeded in delivering enterprise-grade open source solutions.
As virtualization technologies matured and companies built and proved out internet-scale technologies and infrastructures, they realized that they could rent out these resources, such as compute and memory, to anybody. Consumption-based pricing made these resources even more accessible. Companies realized the value in cost savings, productivity and speed-to-market of the cloud and started rushing to adopt this new model. Major companies like Microsoft, Google, and Amazon all have cloud offerings.
The Internet-of-Things (IoT) is the last force that is fueling the Digital Economy. Like the data generated by the digital presence of each person using the internet, IoT also generates large amounts of data that can be exploited to make sound business decisions. IoT demands internet-scale technologies and infrastructures that the cloud and Big Data technologies fulfill.