Infrastructure - Explained
What is Infrastructure?
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Table of ContentsWhat is Infrastructure?How Does Infrastructure Work?Information Technology InfrastructuresDifferent Types of InfrastructuresCategories of InfrastructuresPrivate Investments in Public InfrastructuresInfrastructures as AssetsAcademic Research
What is Infrastructure?
Infrastructure refers to all the physical systems of a business or a nation. It includes transportation, communication, sewage, utility, etc. Infrastructures tend to be high cost systems and they are crucial to running a nation or any establishment. Infrastructure projects can be funded by the public, privately, or public-private affiliations.
How Does Infrastructure Work?
Infrastructure originated in the English Language in the late 1880s. As at 1987, the term public works infrastructure was adopted by the U.S. National Research Council to describe functional structures like highways, airports, water supply, and other resources like telecommunication and combined services. Infrastructure is applied to both large and small-scale institutions and it can contain different structures as long as they're physically visible. For instance, electricity cannot be seen, but the wires, cables, and the grid are physically visible, so they're referred to as infrastructures. Also, the physical presence of data centers and waterboards make telecommunication and water services infrastructures.
Information Technology Infrastructures
Different technical systems are referred to as infrastructures, like networking and cloud servers because of the functions which they provide in business environments. Without IT, many businesses will fail or possibly struggle with their daily activities. Also, they will be stuck looking for possible ways to increase efficiency in their operations. If IT is to fail in a firm, businesses activities will be stalled.
Different Types of Infrastructures
Infrastructures can be categorized into different parts:
- Soft infrastructures: Soft infrastructures are infrastructures that help to maintain the economy of a nation. They're mostly human investments and they assist in delivering certain services to the national population. Examples of soft infrastructures are healthcare's, financial organizations (like banks), government institutions, law enforcement, and education systems.
- Hard Infrastructures: Hard infrastructures are structures required in running a modern, developed and industrialized nation. Examples include highways, bridges, rigs, refineries, and human and capital assets to maintain and operate such structures.
- Critical Infrastructures: Critical infrastructures are assets that the government define as being crucial to the functionality of a nation, like shelter, telecommunication, public health, agriculture, and the likes. In the U.S. there are different authorities and agencies set up to oversee the availability of critical infrastructures, like Homeland Security (for emergency services and government), the Department of Transportation, and Department of Energy.
Categories of Infrastructures
Infrastructures can also include waste disposal services like local dumps and garbage pickups. Some administrative functions which are carried out by the government in form of assigned agencies can be called infrastructures. We can also add educational and healthcare facilities, as well as research, science, and development facilities. It wouldn't be inaccurate to add training facilities.
Private Investments in Public Infrastructures
In some cases, a private firm or entity can choose to invest in a public infrastructure as a part of a business expansion plan. For instance, a transportation company can station buses and rails in different parts of the nation. This will widely benefit the nation, as well as profit the business. For example, Skyway Concession Company entered into a 99-year lease with Chicago City for the operation and maintenance of Chicago Skyway Bridge in 2005. As a reward, Skyway would be eligible to keep all parts of the toll fees, while Chicago City wouldn't have to pay the cost of maintenance again, as well as benefit from a $1.83 billion cash infusion given to them by Skyway. In some cases, private entities might opt for improvement of public infrastructure mostly in the healthcare and education sector. Some might also choose to support local law enforcement agencies.
Infrastructures as Assets
Infrastructure is an asset price that have a chance of being less volatile the equities over the long term and also provide better returns. For this reason, some companies and individuals would prefer to invest in infrastructure funds for the defensive features like funds placed in water or transportation infrastructures.