Internet commerce has been a talking point in the industry for several years, but relatively few large companies have made an impact in the field. Apart from a couple of famous success stories, such as the online bookshop Amazon.com in the US, there has been little real development, and most companies who have started on the track have yet to make significant profits from their efforts. However, all that is about to change. At its Technology Management Forum conference in London last week, US research firm Forrester heralded the beginning of a new era of Internet development.
The conference centred on advising business on their Internet strategy - what the future holds for Internet commerce, how that will affect businesses, and what companies need to do about it. The theme, outlined by Forrester president George Colony, was the growing importance of the Internet as a vehicle for businesses communication. The Internet economy, Forrester forecasts, will be worth almost $200 billion (u122 billion) in the US alone by the year 2000.
Previous communications between firms and their customers and suppliers relied on person-to-person contact, written contact or telephone conversations.
These, Forrester argued, involve trade-offs in terms of intimacy with the customer versus cost. For the first time, according to Forrester, firms can now achieve a level of "affordable intimacy" with their customers by using the Internet.
"The Internet will be the fourth way to exchange information with customers and to facilitate transactions," declared Bill Bluestein, group director of new media research at Forrester. "The growth in revenues will be so sizeable that it will be recognised as a distinct vehicle for doing business.
It gives a level of sales intimacy closest to direct selling with the cost associated with a technological method such as phone selling."
Business-to-business communications are seen as the most rapidly growing sector of the market, and Bluestein set out his ideas on a business model for companies wishing to take advantage of these opportunities as quickly as possible.
First, he said, companies should set up entry barriers to hinder their competitors. "Your competitors are only a mouse click away, so you've got to raise the cost of moving," said Bluestein. This is achieved by developing an interactive relationship with the customer so they don't want to switch to a similar site run by someone else.
Another important factor is building up the right network of intermediaries, exploding the myth that the Internet destroys middlemen. Bluestein advised companies to put their key resellers and partners on the web, if they are not already there.
He rejected the popular belief that the Internet is about one-to-one marketing. "Why mess around with markets of one when you can create online communities?" he asked. Companies should set up online chat forums for their customers, to foster a sense of belonging, he added.
Finally, Bluestein warned "you can do all that, and still screw up".
Meeting the challenges involved in implementing an Internet commerce effort can be a major source of failure. The process must involve all aspects of the company - it is no use trying to set the Internet apart from your core business, it should be integrated into all aspects of a company's work. Full organisational commitment is vital, and should be made soon.
"1998 will be the year Internet commerce begins to crank up in a big way: companies must commit this year or be too late next year," he concluded.
His remarks were echoed by Emily Nagle Green, director of Forrester's people and technology strategies group. She said Internet commerce groups are all too often a "skunkworks" operation - a small team hidden in a corner. Instead, she said, companies need to get serious about how the Internet will change their business.
But an Internet commerce effort doesn't come cheap. Although the average large company with an online commerce group spends $437,000 on its site budget, Green stipulated that they should be spending between $2 million and $5 million by 1998. On the plus side, she added, those who implement commerce sites can expect revenues at a rate of twice the site's costs.
When setting up commerce web sites, companies must also be careful not to fall into the trap - which Colony referred to as "commerce interruptus" - when customers have to wade through masses of irrelevant material and jump through hoops such as entering IDs and passwords. The secret of attracting and retaining customers' interest is to cut to the chase.
One of the key issues dwelt on by several speakers was the importance of involving the right kind of staff with the right range of skills in any Internet commerce effort. Bluestein talked of "economies of skill", warning that companies who don't have a team capable of both technical innovation and marketing decisions will find this lack a barrier to success.
"The creation of an Internet commerce group can't be left to either the marketing or the IT departments by themselves," he cautioned. He recommended companies should recruit outside interactive architects, and set up an Internet commerce team of 20 to 30 people from across the company, ideally led by an employee with at least 10 years' experience with the firm.
The skills challenge is a major stumbling block. Stan Dolberg, director of software strategies at Forrester, told the conference companies need "renaissance people", combining the creativity of an artist with the practicality of a technologist. Such people, he remarked ruefully, are not easy to find.
On a different note, Paul Callahan, Forrester's group director of corporate IT research, argued that the Web is not enough to persuade customers to participate in your online commerce. With the rapid proliferation of business web sites, he asked, "how are people even going to find your company?" Today's web technology is not enough, he said, as companies continue to operate on a "post-and-pray" model. The answer lies in push technology.
"Push technology will completely overshadow the web," he predicted. "Push will re-engineer the Internet by mistake." Bandwidth constraints will also speed the take-up of push, Callahan believes - as it is essentially a broadcast mechanism rather than a full two-way method of communication.
He urged companies to take on push technology now, recommending large sites should sign up with PointCast immediately, while medium and smaller companies should go to Marimba and Netscape's NetCaster.
However, Callahan noted, that push will remain a means of business-to-business communication for the foreseeable future, until companies have figured out a way of allowing consumers to have constant connections.
The real growth in the field of Internet commerce, Forrester reckons, will take place not this year but in 1998 and beyond.
But the message being sent out to business at last week's conference was that companies must put their strategies in place now, or be left behind when the explosion happens.
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