When will business boom on the 'Net? New partnerships, products encourage electronic commerce -- so why the hold up? By Marc Ferranti, IDG News Service

December  1996

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New York (12/13/96) -- Money makes the world go 'round, but not the World Wide Web -- at least, not yet. At Internet World this month, analysts explained why business on the Internet hasn't taken off, while vendors of electronic commerce technology offered products in hopes that it soon will.

While many businesses put out informational material on the World Wide Web, only a small percent are attempting to conduct business -- that is, complete transactions -- according to analysts here at Internet World.

"There is a difference between what is fun and interesting and what is valuable," said David Taylor, vice president and research area director for the Gartner Group Inc. Taylor spoke at a New York conference coinciding with Internet World. "We're doing a lot of marketing and information access, but not running our businesses on the Internet. Electronic commerce is an application in its infancy."

Some vendors reported that large businesses are buying e-commerce applications, but many of these are still in the pilot or development stage.

For example, IBM announced that 100 customers around the world are now using its Commercepoint family of e-commerce products, which includes its Net.Commerce server. Net.Commerce runs on Windows NT and AIX, at prices starting less than $5,000, and a version for System/390 is planned for 1997. IBM reported that Fuji Bank and manufacturer Plus Corp. in Japan, the Egmont Publishing Group in Denmark, and clothes retailer L.L. Bean in the U.S., are using Commercepoint products. Only L.L. Bean, however, has a production transaction system up and running, IBM said.

The basic communications infrastructure to do e-commerce is largely in place, at least in the West, and should be very robust within two years, said the Gartner Group's Taylor. But applications are inconsistent -- in terms of sophistication, ease-of-use, and security -- and inconsistently applied, Taylor said. A one-size-fits-all approach does not work because it leads to information overload for potential customers.

"Businesses look at how many people are on the Web when we should be looking at micro-segmentation -- looking at the idea of customizing the environment for the consumer." Internet "push" technology, which automatically sends out information tailored to user and consumer interests, is a step in this direction, said Gartner Group analysts.

Low expectations?
Despite the advent of broadcast, or push, types of technology, it will be four years before new transaction-based technology is deployed to the extent that electronic commerce becomes a widespread reality, according to a Gartner Group study. This year, approximately 15 percent of large businesses have simple Web sites, but by 2000, a quarter of all transaction-processing applications will have been moved onto the Web, according to the study.

Low expectations on the part of businesses themselves may be dampening growth and deployment of e-commerce systems, according to some observers. Consumers actually have higher expectations about buying merchandise on the Web than merchants themselves, according to a new study.

A survey conducted by the Odyssey research firm for AT&T found that while 39 percent of consumers polled expect to buy online in 1997, only 17 percent of businesses rate the Internet as an important sales channel for next year.

The survey polled a random sample of 2,003 adult consumers and 501 business executives in the U.S. Almost half of the executives said their companies do not have a Web presence today and said they don't expect to have one within five years. Meanwhile, consumer responses to questions concerning their long-term buying plans back up the Gartner Group's timeframe for widespread online transactions. The AT&T study found that 55 percent of the consumers said they expect to buy online within five years.

AT&T announced here that it is extending its Web hosting and transactions service promotional offers through March 31, 1997. Starting at $700 per month, companies can host their Web sites on AT&T's Easy World Wide Web platform and use the AT&T SecureBuy Service to automatically process credit card transactions online. The offer includes free processing of 500 Internet credit card transactions per month for one year.

Increasing dollar purchases
One healthy sign for the fledgling e-commerce industry is that dollars spent advertising online, though still minuscule compared to other industries, is increasing steadily, according to a report unveiled this week by the Internet Advertising Bureau. Established in June this year, the IAB comprises 135 companies that include online services, research firms, and IT vendors. The value of online advertising grew during the first three quarters of the year, from $29.9 million to $51.9 million, to $75.6 million, according to the study, carried out by accounting firm Coopers & Lybrand.

Partnerships among IT companies might also give e-commerce a boost by producing more sophisticated applications, pointed out observers. "Companies are going to find out that they can't do it alone," said the Gartner Group's Taylor.

In addition to a wide variety of announcements concerning e-commerce tools, there were a many of announcements of partnerships, including:

• A joint development agreement between transaction-software vendor Wave Systems Corp. of San Jose, CA, and access provider EarthLink Network Inc., of Pasadena, CA. By combining EarthLink's registration software, TotalAccess, with Wave's encoded electronic content, the companies aim to let service providers set up secure commerce-enabled sites on the Web. The technology was demonstrated here but no timeframe for the rollout was immediately available.

• A pact between Versant Object Technology, of Menlo Park, CA, and Genuity Inc., of San Francisco. The Versant Web Propagation Framework, embedded into Genuity's database replication software, can automatically propagate new or updated Web-site content from a Web site to an unlimited number of replicated, or mirrored, sites, according to a statement from the companies. This will ensure that users will be given the same information, no matter which mirrored site they are looking at, and will increase scalability of a transaction system, since new mirrored sites can be brought on quickly as capacity is reached, the companies said. The combined technology is expected to be available in the first quarter next year. Pricing was not announced.

• A bundling deal in which Silicon Graphics Inc. will use Cadis Inc.'s Krakatoa catalog publishing system in its WebForce Commerce Toolkit, to be shipped in the first quarter next year. Krakatoa is designed to help create interactive Web catalogs for transaction applications. Cadis is based on Boulder, CO.

--Marc Ferranti, IDG News Service, New York

Resources

• Gartner Group
  http://www.gartner.com
• The Internet Advertising Bureau can be reach via e-mail at iab@edelman.com mailto:iab@edelman.com
  
• See related story " Electronic commerce takes center stage at Internet World
  /sunworldonline/swol-12-1996/swol-12-internetworld.html

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