You don’t have to be a software programmer to be familiar with the principle. Since the early 1970s, Moore’s Law — named after Gordon Moore, one of the founders of Intel — has been universally touted within the computing industry. The law has many variants, but the gist of it is this: Computing power will increase exponentially, doubling every 18 to 24 months, for the foreseeable future.

Too bad it isn’t true. According to Ilkka Tuomi, a visiting scholar at the European Commission’s Joint Research Centre in Seville, Spain, not only is Moore’s Law losing significance, but it never fit the data very well in the first place. In an academic paper published last month, Tuomi dissects the many variants of Moore’s Law and shows that, in fact, none of them match up well with actual advances in chip technology. (See Tuomi’s paper for more.) For example, processor power has increased dramatically since 1965, when Moore first proposed his law, but at a slower rate than expected, doubling about every three years instead of every two. That’s equivalent to a ninefold increase in processing power per decade, compared with a 32-fold increase per decade with a two-year doubling period — a big difference.

What’s more, it’s hard to translate processor power into increased computing power, because there are so many other factors involved in computer performance. As anyone who has been forced to buy a faster, more powerful computer in order to run the latest version of Windows knows, today’s operating systems are memory and processing hogs. You probably aren’t much more productive on a top-of-the-line 2-gigahertz Pentium 4 desktop running Windows XP today than you were with a 300-megahertz Pentium II running Windows 95 five years ago. The sad fact is that the hardware upgrades of the past decade have been driven more by Microsoft operating system demands than by consumers’ demands for more power. As the old saying goes, Andy Grove giveth, and Bill Gates taketh away.

If Tuomi’s right (and I find his argument persuasive), why should we care? First, Moore’s Law gives the false impression that progress in the semiconductor industry is unlimited and unconstrained by the laws of supply and demand. Unfortunately, that just ain’t so. In reality, the cost of chip factories increases exponentially with each new generation of processors (a trend known as Moore’s Second Law). For example, Intel is spending $2 billion on its latest chip fabrication site in Kildare, Ireland. That’s a very big bet that continued demand for more processing power will eventually sell enough chips to pay for the plant. Take away the demand and you’ve got an economic crisis in the semiconductor industry. More important, Tuomi’s analysis shows that processor power alone is only part of the business of technology — and an increasingly small one at that. Look at any company’s IT infrastructure today and you’ll see that processor power is not a significant issue. There’s more than enough power available (unless you’re one of the workers unlucky enough to be saddled with a four-year-old desktop trying to run Lotus Notes R5 or Windows XP). The biggest corporate technology problems now have to do with storing, managing, organizing, retrieving, and guarding increasingly huge amounts of data.

That’s why the hottest areas for enterprise IT are in segments like storage, knowledge management, customer relationship management, business intelligence, and data mining. These systems are all about handling large amounts of information — and making it useful. Significantly, such systems often require that you spend more time reworking business processes and training employees than you devote to installing the technology itself.

“Sometimes we perhaps invest disproportionately in technology, believing that technology, as such, solves our problems,” Tuomi says. “We often underestimate efforts and investments needed for organizational change and new work practices, for example.”

The challenge now is not finding new and more powerful technologies to serve our needs — it’s organizing our companies and our work lives so that we can use those technologies more effectively. We can no longer trust in the magic wand of Moore’s Law to solve our computing problems for us. Instead, we must learn how to use the tools we already have.

This will be my last Defogger column for Business 2.0. I’ve written more than 80 of these columns since July 2000, and I hope that during that time I’ve helped you to understand and make smarter decisions about technology and its strategic uses in business. Now it’s time for me to move on. If you want to find out what I’m working on in the coming months, please sign up for my personal newsletter at So long, and thanks for all the e-mail!

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