Internet Commerce: Building the Future

By WAYNE RASH

As a superhighway, the Internet is well-paved and primed to carry lots of traffic. Along its path, however, are a great number of partially built shopping centers with parking lots and access roads still under construction.

Bandwidth isn't that much of a problem on the Internet itself, but access to the Internet is. In addition, the number of full-blown commercial destinations is limited.

As a result, the Internet is still really in its formative stages, and despite its early and dramatic impact on commerce, its final form remains to be seen.

The problem isn't the Internet itself but a lack of applications that take full advantage of its potential.

"I'm not sure the highway is completely built, because we don't know what kind of cars people will be driving along it," explains Arthur van Hoff, chief technical officer at Marimba Inc., a maker of electronic-commerce applications and development software.

In the long term, "We don't know the [type of] usage the Internet will have," he says. "People are starting to see it as a utility."

Like van Hoff, many in the industry see the Internet--like other new technologies before it--just skimming the surface of what it ultimately can accomplish. In this case, the Internet may well emerge as a full-blown service or utility carrying many types of media.

But converting the Internet from a computer network or information conduit to a pervasive data utility is no small task. For one thing, van Hoff suggests, it implies that the applications that create the fundamental presence of the Internet--from logon to order processing--must become sufficiently transparent so that they are effectively invisible to end users.

"A few years from now we hope the big applications will be Internet-enabled, not just Web-enabled," says Jorge Taborga, chief information officer at Bay Networks, now a business unit of Northern Telecom. Taborga says too much focus on the Web itself limits what he sees as the real power of Internet commerce: the ability for business-to-business information to be transferred automatically and seamlessly as companies link the flow of money and products into an organic whole.

Tighter Links

The electronic symbiosis between companies, their customers and the means that link them on the Internet can only get stronger. Already some companies, such as the online brokerage E*Trade Securities Inc., essentially exist only online. Customers reach them through the Internet, all communications take place electronically and the results are delivered across the Internet.

"E*Trade is an example of what we're seeing with well-integrated sites," explains Larry Bohn, CEO of net.Genesis, a developer of Web-site analysis software. Bohn predicts that as commerce and the Internet become inseparable, the companies that fuel them will move from simply conducting business-to-building relationships online.

"You'll see new ways of touching the customer online," Bohn says, explaining that while companies already are starting to work on relationship-building, the commerce tools and corporate network bandwidth necessary for it to be really effective still have a way to go.

"One of the big pushes in e-commerce is building a close relationship with your customer," says Todd Elizalde, director of Internet commerce at Cisco. Elizalde, who runs Cisco's $5.6 billion Web site, says one of the characteristics that make the Internet unique for commerce, as well as other activities, is its ability to personalize transactions.

The need to keep a close relationship with each individual customer, "even if there are 50,000 of them," is something that can only be done on a practical basis over the Internet, he says. Personalization is a way to get people to come back to a site. "It's something you can't do in any other medium," Elizalde says. He compares this ability to the feeling customers have when they enter their neighborhood stores where they are known by the proprietor.

Ultimately, personalization and ubiquity will affect how people conduct their daily lives and how businesses interact with each other. For Cisco, this means the company can achieve much higher levels of customer satisfaction, and therefore more customer loyalty. For other businesses, it means customers do more business.

Elizalde says since he's started trading stocks online, he trades more. He also says that he prefers to do other commercial transactions online instead of over the phone or by mail.

Net.Genesis' Bohn agrees. "I watched my entire family's behavior change after we got a cable modem," he says. "I bought shocks for my car, we buy books and records and subscribe to movie and TV sites."

Bohn suggests that while personalization is very important, ease of access and the bandwidth of the local connection also are vital. In fact, the availability of fast, full-time access to the Internet seems to be an important part of viewing the Internet as ubiquitous. Bohn, Elizalde and others note that both individual consumer and business-to-business activity increase dramatically once the difficulty and delay of accessing the Internet are reduced.

E-commerce providers contend that high bandwidth isn't always the key to success. "Ninety percent of Cisco's revenue from Latin America comes over the Internet," Elizalde says, adding that 80 percent of the company's revenue from Asia also comes over the Internet. "These are low-bandwidth areas," he points out, explaining that ease of use, availability and personalization are the most important characteristics for users, as long as the bandwidth is adequate.

Of course, defining "adequate" is a great mystery. Virtually everyone considers the 10-Mbps capabilities of some cable modems to be adequate for Internet access and most consider speeds below 28.8 Kbps to be inadequate. The region in between depends on the use and expectations of the user or business accessing the Internet. Others, such as net.Genesis' Bohn, think that anything less than xDSL or cable modem access speeds simply doesn't cut it. "Anything less feels oxygen-constrained," Bohn says.

Future Shock?

If there's anything generally agreed upon about the Internet, it's that it is now only a faint glimpse of what lies ahead. "We're in experiment land," says John Parkinson, Ernst & Young LLP's chief technologist. Parkinson says at this time, change on the Internet is so rapid that it's nearly impossible to quantify accurately, much less predict with a great deal of certainty, where it's heading.

On the other hand, as Parkinson points out, some things must change. He notes, for example, that the applications that businesses use to offer products and services on the Internet do not scale well. Today, a business has to guess whether a presence on the Internet will be successful and therefore worth the money to create an extensive, high-performance site. "This [uncertainty about scalability] is proving to be a barrier to adoption," Parkinson notes.

Likewise, he says that while overall bandwidth for most current uses of the Internet is adequate now, future applications such as video or high-quality music still present bandwidth limitations.

Still, Parkinson thinks the Internet will be thoroughly integrated into the economy in a surprisingly short time.

"The Internet will be a factor in 50 percent of the gross domestic product in the U.S. and Europe by the first half of the next decade," Parkinson predicts, and "25 percent [of that GDP] will be electronic commerce." Parkinson also predicts that Europe will eclipse the U.S. in Internet commerce by the end of this decade.

The ubiquity of the Internet will have a profound effect on how it's used, both by business and by consumers. Van Hoff suggests that the Internet is reaching the point where it will become an information utility rather than a computer network, at least from the viewpoint of those who use it. He says just as people don't need to know how a telephone switch works to make a telephone call, they won't need to know how the Internet works to use it.

Along with this utility status may come a diminished role of software manufacturers. "We need to extend the life of the devices people use to access the Internet," van Hoff points out, noting that consumer appliances have a life expectancy of 25 years--something no one expects of today's computers. To accomplish this, software must serve to keep the operations of the device current. "Software will become part of the infrastructure," van Hoff explains.

Regardless of exactly how it gets from where it is today to where it will be tomorrow, the Internet will change the world, and commerce, beyond anything its users recognize today.

A decade from now, the concept of "logging on" to the Internet will be as archaic as it would be today to pick up a phone and say, "hello, Central," and expect to be connected to someone else. Instead, we are now at the point with the Internet that we were with the telephone when the first manual switchboard was introduced. As van Hoff suggests, it will just be there.

"What happened with electricity, the telephone and radio will happen with the Internet," van Hoff says. "They completely changed from what was expected." Like those technologies, the Internet will change, and like them, it will morph into something else. For now, though, no one knows exactly what those cybercities will look like.