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The Coming Revolution in eBusiness

By Alan S. Cohen
Email: acohen@us.ibm.com
Alan S. Cohen is Managing Director, Electronic Commerce, IBM Internet Division.

Over the past year, many analysts have focused considerable attention on the incredible growth and use of the Internet -- how it has moved light years beyond its rather humble academic and government origins to become a commercial media. For those of us "inside the firewall," we have not seen a revolution like this since a bunch of IBM engineers moved to Boca Raton to build some weird box called a personal computer, and a young, bright fellow from Seattle showed up shortly thereafter with some software to help make it work.

Much of the Internet buzz focuses on the tens of millions of folks around the world clicking around a World Wide Web that did not even exist three years ago. Some people compare it to the growth of television, except it took less than one presidential term, not ten, to reach forty million cyber folks. There are lots of numbers to look at (the Internet industry is self-intoxicated with statistics). Tens of thousands of entrepreneurs and companies are digging in, looking for the next big Internet idea; 1 billion people connected by 2005; hundreds of thousands of interconnected networks, and tens of billions in venture capital; 500,000 commercial websites; and on and on.

Now, if you read the papers, watch television or get cornered at a cocktail party, odds are some smart person is going to tell you how the Internet is going to revolutionize your business and change your life. Let's debug this notion, since most of the digerati have it backwards. Technology is not changing things, but rather, businesses and people are changing technology. The exciting event called the Internet is a direct outcome of a behavioral revolution in human commerce and communications. This social and behavioral revolution, I believe, will have a profound impact on the manufacturing community.

The Internet explosion occurred because people have, over the past generation, altered their view of how they prefer to do business and how they want to interact with each other. Business and personal needs have changed and become more acutely pronounced in a time-competitive society. One of the clearest examples of this phenomena is the meteoric growth in catalog, non-store shopping and purchasing over the past two decades, resulting in a multi-hundred billion dollar industry.

Catalogs have been around for over a hundred years (that is how most of rural America got introduced to Sears), but the introduction of the telephone (and toll-free 800 numbers), the widespread acceptance of credit cards, and the evolution of focused niche publishing and marketing resulted in the most powerful electronic commerce trend ever, "distance selling." Asking whether thumbing through a glossy magazine is a better way to shop than the packing up the family and heading to the mall is the wrong question. Asking where the L.L. Bean catalog is, because it is a week before Mom's birthday and no one has anytime to make it down to Macy's, and gee, she just loves the stuff in the catalog, and they can ship it, gift wrapped, right to her house....that is the right question.

This trend is not only true for consumer markets, but also for businesses that sell to other businesses. Business-to-business (b-t-b) cataloging is growing at roughly 10% per annum, twice the pace of non-catalog b-t-b commerce, and higher than growth even in the consumer economy.

Just as people became comfortable using the phone to do business, so they are now becoming familiar and inclined to use PCs to learn about goods and services, to buy and sell, and to complete transactions. At IBM we call this juggernaut "eBusiness." The universal connectivity of the Internet, the rich and growing suite of content, collaboration and commerce applications, and, most significantly, the changes in our business culture, are conjoining into an explosive mix that will fundamentally change how business is done. The attendant risks and rewards for those companies that surf the wave rather than letting it blind side them on the beach will make the eighties and early nineties reengineering trend look like child's play.

There are three key societal business trends at work here that announce the dawn of the eBusiness revolution:

  • a radical new customer self-service model

  • the increasing need for specific information in a world of too much choice

  • the lack of time to complete mission critical tasks in an eight-hour

  • work day

To illustrate the first trend, millions of people have begun to abandon their travel agents to research and book flights directly from the airlines and other new intermediaries. If you are an American Airlines Advantage member with a link to the Internet, it can be 4 a.m. in, say, Montevideo, Uruguay, and you can check your frequent flier miles, plan your next trip and place and pay for reservations (your choice: use ticket-less travel or have the good folks in Dallas put them in the mail). You are never put on hold or given wrong information by a travel agent or a computer reservation clerk. When people complete transactions themselves over computer networks, what they are really saying is "skip the order takers, just get me information about products and services that can help me make a decision. The PC plays Willy Loman.

Secondly, some kinds of purchasing works better via a computer network than in person. Assume you are a small businessperson and you walk into any consumer electronics supermarket and try to buy a VCR for customer demos. You stare at a large wall with several dozen makes and models from well known, high-quality manufacturers, costing from fifty-nine to five thousand dollars. Then you try to ask a sprinting salesperson which one to buy. Now, with eBusiness technologies and the connectivity of the Internet, you can quickly assimilate product information directly from manufacturers or consumer product analysts, determine the unit that meets your specific needs, and then scout out the least expensive place to make the purchase, either via the Net or at a good old bricks and mortar store. And no one is pushing you to brand X because the store has a better kickback from the manufacturer.

Finally, in our harried, stressed-out competitive work and personal lives, businesses and consumers have less and less time to reach their suppliers. So, if you are the owner of a restaurant, and at midnight on Sunday the dishwasher eats more than half your silverware, you can go to your Hong Kong distributor's Internet storefront, provide your password to see the authorized product and price list, order what you need and receive a binding electronic confirmation, comforted knowing the new cutlery will be on its way and that you will not forget to complete this mundane task the following morning when you have the annual salary review with your temperamental, but talented chef.

To date, privacy and security have been the bugbears of electronic commerce. The good news is that most of the requisite technology is coming to market to address these critical issues. If you can safely walk around with a little plastic bank card that holds the key to your life's savings, then we think there are ways to complete credit card transactions on the net. The recent Secure Electronic Transaction (SET), set up by IBM, Mastercard, and PBS (Danish Payment Systems), and ratified in Denmark on New Year's Eve, signaled the Web is open for business. Sure, people have hacked on to websites and inserted their unique form of graffiti, but how many credit card numbers have been hacked?

If you think people are worried about giving their sensitive financial information over the Internet, think again. Charles Schwab -- the company that brought Wall Street to the masses -- expects to sign up more customers in the next 12 months over the Internet than they have in the past decade through every other available channel. Perhaps the real driver here is that most people would like to participate in the stock market and find Schwab's Internet site amazingly easy and convenient, as well as being more informative, and less intimidating than other methods.

Of course, the Internet now has contrarians. Some analysts are predicting an Internet backlash: frustrated with the lack of business going on, companies will unplug their websites; or the Web will collapse under the weight of unsustainable traffic load. For those American businesses that walk away from the Internet now, it is a little like walking away from the stock market, just as upwards of 1/3 of all Social Security funds may be headed into the market. Clearly, the competitive-intense global economy is driving us to use eBusiness as a channel for getting things done. Time-poor American families will use the net to research and purchase services like life insurance and mutual funds, books and software, and, yes, clothes and groceries. Nothing can replace running your fingers through a new cashmere sweater, but would you rather spend Saturday fighting through the mall, or go out ice skating with your kids?

So when you look at what the Internet is and what it means for society, look no further than the existing problems and opportunities that are being wrestled with. How will businesses use the Internet? To perform the same things they always do: serve and retain customers, market and sell products, deal with tangled teams of vendors and partners. And, most significantly, to put customers in control of their supplier relationships; a perfect technology enabler in an era of perfect eBusiness consumerism.