Why has the world's honeymoon with organisations and concepts that were expected to revolutionise our world ended? Capco's Shahin Shojai, director of strategic research and Samuel Wang, global head of marketing & PR, identify some trends that sent predictions into a tailspin.

During the heydays of the technological revolution, a large number of prognosticators made predictions about how the world we live in would be transformed by the tremendous strides made in technology. Of course, since that time the world's honeymoon with those organisations and concepts that were expected to revolutionise our world has ended and some people have even grown to be repelled by those same buzzwords that were once revered by the major global industries.

But, why were so many people so wrong? Could it be that the predictions were extremely positive in order to, as some suggest, help boost the share prices of those companies that the investment banking institutions in which these analysts were employed were helping to take public. Why were the margins of error so large? Could it be that other factors are responsible and that the original predictions were not incorrect, if somewhat exaggerated? These are the types of questions we aim to answer in order to identify what trends might be anticipated for the future.

What ever happened to disintermediation?
One of the most widespread predictions of the late 1990's was that financial intermediaries would be disintermediated. The intermediaries that were expected to be eradicated were not, however, limited to brokers. Predictions, including one made by one of the authors of this paper, also focused on disintermediating the investment management companies, by arguing that custom-tailored mutual funds, which are structured by choosing a combination of money managers from among a list of best performers to create your very own discretionary structure, would challenge the more generic and one-size-fits-all products manufactured by the mutual fund industry.

Neither the disintermediation of the brokers, especially at the top end, the private bankers, nor the fund management companies took place. If anything, the reverse is true. The value of advice has in fact gone up, mainly because while investors realised that they should question the advice of their advisors they also realised that it is not easy to make money from markets outside of a speculative bubble.

Did technology make it possible to arbitrage human capital?
Another major implication of revolutionary technologies, and the global interconnectivity that they create, is to make it possible for organisations to become virtual.

For example, car manufacturers have been able to become basically virtual assembly plants, with very powerful sourcing, distribution, and marketing capabilities. They do not actually make anything, but with their mass purchasing power, they assemble highest quality, lowest cost components provided by their thousands of global suppliers.

This capability has been significantly improved by the ability of these providers, and the assemblers, to access each other's supply chains through online channels.

This interconnected world makes it possible for a greater number of people to work from their homes, resulting in lower transportation costs, reduced commuting times, and consequently greater productivity and less pollution. The logical extension of this move would, of course, be to allow staff to telecommute from other countries, hence the establishment of offshore centers.

Offshore assembly plants are also beneficial politically to car manufacturers who sell in those markets where the plants are based, so that they can meet local domestic content and sourcing requirements.

Of course, an important aspect of offshoring that is overlooked is its impact on the pension time bombs that are ticking in the Western Economies, especially the European ones. Falling population growth rates in Europe will over time make it harder for the young tax payers to pay for the very generous pension promises made by their governments to their ever longer living pensioners. Of course, some governments are taking steps to sort this problem out, but one immediate solution has been increased immigration.

Despite its negative image in the world of national politics, immigrants have helped fill the lower-wage labour needs of local communities and pay some of the taxes needed to cover the pension obligations of European governments. But, what happens if these immigrants no longer need to move to Europe to have the same quality life? What if they could stay in their own countries and earn higher wages at home while still working for a European employer?

The answer is, of course, that the European population growth problem is exacerbated. The number of young people leaving poorer nations falls and worse still, they pay their taxes to their own tax authorities, rather than those of the European countries.

The double whammy of falling tax revenues from immigrants and higher unemployment as a result of jobs lost to cheaper overseas labour, will force a number of governments to respond against this trend. As a result, we predict that sooner or later, national governments that have not already done so will make it harder for companies to make local employees redundant in order to move jobs to cheaper locations offshore.

What about security in such an interconnected world?
An important issue that has risen in recent years is security, in specific client confidentiality. Almost every month, we hear about a different type of scam used by individuals who are able to hack the secured systems of major financial institutions in order to get access to client information or send global emails asking clients to register on what looks like their bank's website.

Some even tamper with ATM machines, or even create fake ones, in order to get clients' card and password details. In many cases the perpetrators are based thousands of miles away. It somehow seems that the number and types identity fraud seems to be increasing exponentially with no end in sight.

Will moving operations offshore increase this risk? Will it be easier to access client information if it has to go back and forth between the headquarters, branch, and the offshore operations processing hub. The US treasury believes that if banks are not careful, they could face significant operational risks.

On the other hand, certain companies feel that they need not share client account information with their offshore operations processing hubs and can consequently mitigate, if not eliminate, this risk. We leave the judgment on who is right to the readers.