The Internet, for corporate use at least, looks like it is about to move from its not-for-profit roots to supporting a wide range of commercial corporate services. In two senses then, Ecommerce looks like it might have broken the mould.
Usually a new technology is punted, the IT/comms industry generates huge, unrealistic expectations about the commercial applications of this new technology, coupled with an impossible timetable as to when it will be widely available. Reality kicks in, the hype-merchants go quiet and much later than advertised ISDN or FDDI or ATM or Whatever finally makes steady, unremarkable progress, having already been superceded in the publicity stakes by the Next Great Thing.
The emergence of ecommerce is testament to the power of the bottom line.
John Venator, president and CEO of the influential, Chicago-based Computing Technology Industry Association (CompTIA) explained that his organisation's initiatives, instigated some four years ago by IBM, Compaq and IBM, among others, was "driven by shrinking margins and a great desire to save money, plus the need to hedge their bets and make sure they didn't back the wrong horse".
Ecommerce figures rising
With money as a motivator, those driving Ecommerce have apparently managed to overcome the dual handicap of industry-wide initiatives and governmental interest; both generally seen as antitheses to fast, commercial progress.
Since becoming Secretary of State for Trade and Industry, Peter Mandelson has harped on about the great importance of Ecommerce to British economy, and the programmes in process under the aegis of the European Commission are legion. Mark Compton-Hall, Ebusiness consultant with IBM Global Services based in London, puts it more strongly. He claimed: "The future of the company rides on (Ecommerce). It is at the core of almost everything we do. The profits from selling hardware have been eroded, but there is more mileage in providing services." This, presumably, is consistent with IBM toying with the idea of divesting itself of its Global Network, but continuing to provide service by buying back capacity from the GN and other sources.
London-based telecoms consultancy Schema reckons that the number of company sites in Europe using Ecommerce to sell goods and services will increase from 500,000 to an estimated eight million by 2003. This represents approximately three million companies, or 40% of all European businesses. By 2001, Ecommerce will already account for 13% of total European business revenue, growing to 25% by 2003.
Business-to-business Ecommerce (business-to-business transactions using the Internet, or technologies derived from the Net such as browsers and the Web) accounts for the lion's share of the market, as opposed to consumers using the Internet for purchases. Industry analyst IDC reckons that more than $1.5 billion (#8.8 million) of business-to-business Ecommerce will be transacted across the Internet during 1998 in Western Europe, compared with only $800,000 (#467,836) in 1995. IDC expects the amount to rise to almost $18.5 billion (#10.8 billion) by 2001. In contrast, consumer Internet spending was quicker off the mark, reaching $1.9 million (#1.1 million) in 1995 in Europe, but is expected to grow more slowly in the coming years , amounting to almost $11.7 billion (#6.8 billion) by 2001.
Lessons to learn from EDI
There are compelling arguments for the imminent rise of Ecommerce. Improve communications with suppliers and customers, reduce delivery cycles and stock holding time, make information available to customers whenever they want it and - the corollary of all these factors - save a lot of money.
Many of the same notions drove the move towards Ecommerce's forebearer, Electronic Data (or Document) Interchange (EDI).Yet EDI failed to become the all-pervasive method for businesses to trade with each other. This was despite massive standards-making efforts on the part of such bodies as the Article Numbering Association (ANA) to establish national (Tradacoms in the UK) and international (Edifact) standards for document formats.
In the end, although good progress was made in certain pioneering sectors - most notably the motor trade, manufacturing and retail - EDI failed to live up to its much vaunted potential.
A couple of issues were responsible for EDI's limited success. Robin Duke-Woolley of Schema says: "Companies that adopted EDI tended to be large concerns who then tried to insist that their suppliers adopted it too. The big concerns were trading in such volumes that the investment needed to set EDI up was worth it because of how much they gained from streamlining their operations.
Plus, they could afford the necessary technical expertise. Their smaller suppliers did not have the technical nor financial resources to implement EDI, nor was it particularly to their advantage to do so."
Consequently, most EDI-adopters ended up with a combination of EDI with their bigger suppliers and traditional phone and paper-based correspondence with the smaller ones that were deemed indispensable. In contrast, as Duke-Woolley explained: "The flexibility of Internet-derived technology allows a richer mix of communications than the computer-to-computer approach of EDI which removed the human element. Interchanges between individuals are essential to project management and all types of customer service and support."
What's more, this personal touch can be achieved online at a fraction of the cost it would take to do so by phone. As Duke-Woolley put it: "If they are quick to seize the opportunity, smaller enterprises can be highly effective - your size doesn't show on the Net".
As yet, EDI is not routinely being sent over the Internet, but indications are that it soon will be. The first UK demonstration of sending standard, interoperable EDI documents, like orders, invoices and acknowledgements, across the Internet took place at the Electronic Commerce Show at London's Olympia 2 exhibition hall on 13-15 October. EDI documents were sent between stands representing Albany Software, ElcomSystems, Harbinger UK, Intershop UK, Pegasus Software, Perwill, SAA Consultants and Sterling Commerce. They have all built on the standards work from the Internet Engineering Task Force (IETF) on EDI over the Internet (EDIINT).
Although often overlooked, the potential of the aggregated Small and Medium-sized Enterprises (SMEs are defined as companies with fewer than 500 employees) market in the UK is staggering. We have just over 3.5 million employers of whom 94% employ fewer than 10 staff and 99% of whom have fewer than 100 employees. SMEs account for about 47% of the UK's Gross Domestic Product (GDP), with firms of up to 100 employees accounting for 29% and those with 101 to 500 employees contributing around 28% of GDP.
It is hardly surprising that IBM, along with a number of other large technology companies, is falling over itself to co-operate with DTI to help spread the word among small and medium-sized businesses. IBM's Compton-Hall said: "SMEs are often under-financed. The challenge is to make (Ecommerce) accessible, affordable, understandable and easy to do fast.
Microsoft tracks purchasing
"Microsoft's approach to this challenge, for companies of all sizes, is through its Value Chain Initiative (VCI) which was established 18 months ago in the US, but is now being rolled out over here. Microsoft is working with over 180 software suppliers to ensure that their applications can exchange data with Microsoft's applications software, according to John Noakes, business manager for Ecommerce with Microsoft here in the UK.
These partners include SAP, Baan, PeopleSoft, Compaq, Harbinger, Great Plains, Logility, TanData, Unisys and Exe Techology.
"The underlying software is called the Commerce Interchange Pipeline (CIP). If you like, it's the plumbing from Microsoft that supports a dynamic data stream," exlained Noakes. "This means it doesn't matter if the distribution company is using Unix, the transport company running a PC and the manufacturer has AS400, because through Microsoft CIP you can glue the whole lot of them together in conjunction with Site Server CommerceAddition and the NT environment.
"Microsoft has also set up a Customer Advisory Board which comprises 28 key global countries," according to Noakes. "All of them have supply chain management issues themselves and we are looking to them to help us set the requirements and needs to the partners we are working with in CIP." The Advisory Board includes Boeing, Coca Cola, Compaq, FedEX, Nike, McDonalds, Proctor & Gamble and our own Marks & Spencer. They meet on a regular basis to discuss their common needs and best practice.
For larger companies, the trick is to exploit intranets for internal efficiencies as well as extending them into extranets to include suppliers and/or customers. Mark Masterson of ECS, a company specialising in Web-based purchasing and sales packages, claimed that in many large organisations 40% to 60% of all monies spent on supplies, excluding material involved in the core production process, is uncontrolled. He argued that many of The Times top 150 companies will spend at least #2 million a year on the buying process itself - excluding the value of the goods - locating, ordering and chasing delivery of what they want.
Microsoft recognises this about itself, too. It now has its own purchasing intranet, MS Market, available in all its offices. All its suppliers are linked into the system and update their catalogues online. Buyers can see the price and delivery details and can raise a purchase order on the spot because the intranet is plugged into the SAP R3 purchasing software used everywhere by Microsoft.
In contrast to the hysteria surrounding the issue of security in any discussion of business-consumer Etrading, concern about it for business-to-business Ecommerce does not appear to be a major source of anxiety.
But that is not to say it is not an issue. As Roger Till, a director of the new organisation e-centre uk (formed from the merger on 7 October of the ANA and the Electronic Commerce Association), wryly commented: "EDI was characterised by open (standard) messages in a secure environment (leased lines) which has now moved on to people wanting to send secure messages in an open environment - the Internet."
Amancio Kolompar, business manager, networked commerce with EUNet based in Amsterdam said: "In business-to-business Ecommerce, ordering and billing is done online, but not money transfer." He added: "There are also standard technologies - SSL (Secure Socket Layer) and HTTP5(Hyper Text Transfer Protocol For Security) - which mean every single Web site can be encrypted by Micorosoft, Netscape and Apache. They are not 100% safe, but then we know that nothing is."
Schema's Duke-Woolley thinks it makes great sense for carriers and service providers to offer encryption and other security as part of their service on dial-up access lines for a number of reasons. Firstly, it ensures that encryption throughout an extranet will be compatible. Secondly, advanced security features might also help it provide guarantees about quality of service across its own IP network which can then be used to transport EDI packets too. Thirdly, it could be important at a later stage if the customer wanted to buy Internet telephony from the service provider.
Service failures will cost
This is already beginning to happen. At the beginning of October, UUNet WorldCom announced Service Level Agreements (SLAs) guaranteeing total availability and reliability of its Internet network in the UK for its business customers. Any failure to keep to service promises will result in the customer's account being credited. Its counterpart in Germany has just announced that it has chosen Nokia's "single box" security solution which comprises a router with Firewall-1, encryption capabilities and multiple interfaces, and was developed for this carrier/ISP market.
For their part, carriers are busting to get into the intranet/ Ecommerce business, which they have patently failed to do thus far. The last year or so has seen massive efforts by the carriers to acquire Internet and IP skills and products. From the software providers' side, teaming up with carriers gives them potentially better access to corporate customers - and this is the market and angle Netscape is really going for.
The company's chief executive Jim Barksdale recently commented: "Users don't want to mess with technology, they want a service hosted by the operators."
Netscape ahead of rivals
Netscape has formed strategic relationships with carriers including France Telecom, Deutsche Telekom, BT, KPN Telecom, Telfonica de Espana and Swisscom to deploy a new suite of products designed to give corporate users more administrative control of the intranets/extranets supplied by a carrier.
Netscape's software provides carriers with professional services, systems consulting and a suite of products for hosting intranets. Their corporate customers still manage their own sites, but should gain the advantages of lower costs, ease of use, simple administration and using a single service.
At about the same time in September, BT and Equant signed agreements with IBM's Lotus Notes division which will allow users to outsource their intranet applications administration to service providers. BT is to manage Lotus Domino Internet services for its customers that will allow them to add features as required. Equant will manage both Domino and Lotus Notes.
Netscape's products can support more than half a million users and up to 2.5 million messages a day. Steven Wastie, solutions marketing manager with Netscape, is somewhat scornful of would-be rivals in the carrier market. "We have always been used to dealing with millions of users, unlike the rest of the directory products which come from a LAN background and that simply will not scale to carrier-strength," said Wastie.
Netscape's products are to be deployed by more than 75 operators and ISPs around the world, including its recently announced strategic partnership with new generation carrier Qwest. The latter is to market Netscape's unified messaging and Ecommerce products to its corporate customers, while Qwest will supply the bandwidth to Netscape's Netcenter portal (a primary Web access mechanism) site which offers virtual office applications such as being able to use voice mail and fax on-line.
Ecommerce's undoubted appeal to all types and sizes of business probably means that before too long we will be talking about the Internet economy. Whether or not that reaches the giddy heights of a global total of $1 trillion by 2002, including both consumer and business-to-business transactions, remains to be seen.
But perhaps one of the most hopeful signs is that it is the users that are driving the market, who are just getting on with it, while the industry and government debate the bigger issues.
CASE STUDY: H&R Johnson Tiles
A good example of a company seeing an opportunity and getting on with it is H&R Johnson Tiles Limited of Tunstall near Stoke-on-Trent.
It supplies multiple outlets such as Homebase, Do-It-All and Wickes, among others, as well as far smaller retailers. H&R Johnson has used EDI with many of its larger customers for some years and extended this to Web-enabled ordering in March 1996. Non-EDI multiples and smaller companies simply access the site via their ISP at will, to check stock levels, make enquiries, place orders and find out delivery times.
Orders can be prepared offline or sent to H&R Johnson as flat files.
A small Visual Basic program written in house takes care matching up the differing product reference numbers used by the company and its various customers for the same items. Ken Packwood, MIS executive with the company, said that his employer now handles three times more transactions with 20% fewer staff on phones and typing orders into the system.
With fewer staff, H&R Johnson has also managed to shorten the delivery cycle so that orders are fulfilled within the same working week, even if a single order from Homebase, say, involves 220 stores. Packwood said: "There is no way we could take those orders and deal with all the logisitics manually to keep delivery times so short."
He claimed that none of H&R Johnson's competitors offer a comparable service and added, "After all, who would you rather deal with, someone you have to call to find out what they have in stock and when they can get it to you - which can be very time-consuming - or looking it up in your own time and getting an instant response? It is a particular boon for contractors submitting tenders to customers."
Geoengineering on the sea floor near glaciers would form a new ice shelf to prevent melting
Alterations in capillary blood flow can be caused by body position change
Curiosity rover is in 'normal mode' but not transmitting scientific data back to base
NatWest outage comes a day after Barclays' IT systems shut out customers and staff