The Dream Still Lingers

Remember how the world was going to change? Smart sensors in your refrigerator would notice that your milk freshness date had expired and it would add a half gallon to your electronic shopping list. As items gathered, you would click the list over to WebVan, which would bring groceries to your door. WebVan, of course, is gone, and my refrigerator certainly doesnt have any sensors.

The WebVan demise produces two responses. The I-told-you-so group gets one more example to support its belief in the utter weakness of the Internet. This group never believed for a second any of the sweeping claims of the new, new economy and the transformative power of a fully connected world.

The head-in-the-sand group gets to explain, yet again, that WebVans problem was weak management at the top. The executives betrayed a great idea with their stunning incompetence. This group believes the Internet has already conquered the world and that the distraction of WebVans collapse clouds the clear success of the Web.

Im still struggling with a third point of view, which goes something like this: We dont know yet where and how the Internet will affect our lives, but eventually, there will be profound changes. Television has certainly had a profound effect on all of us, and the Internet is like a few hundred potential TVs. Only right now, we dont know which of these will take root and grow.

There are two clear winners already. Both of them have affected business more than consumers. One is email, and the other is business-to-business ecommerce. Email has connected family and friends in a new manner, which helps in a world where children typically live in different states than their parents. But email is not equal to the telephone in its ability to let family and friends really communicate.

For business, however, email has completely eliminated the typewriter. Business correspondence, proposals, blueprints, legal briefs, all of these standard business communications now travel over the Internet delivering considerable savings to both the sender and the recipient. Count me among those who are convinced that email is truly the Webs great killer application.

The other area of the Internets phenomenal success is business-to-business ecommerce. This may seem a strange statement, given the absolute crash of the dot com world and the beating taken by virtually every public tech company. Mention the word e-marketplace and people snicker. Companies like Ariba, Ventro and VerticalNet were considered giants just a few months go. There companies were going to be the next generations GMs and GEs. Now they very well may be moving along the same sorry path as WebVan.

But something very big is happening within companies, and it is going on very quietly. Ten years ago, companies allocated about 10 percent of their capital spending to information technology (IT). IT these days is virtually synonymous with Internet technology. This year, IT spending constitutes more than 50 percent of all corporate capital spending. And even while corporations are laying people off and cutting spending on everything from new facilities to professional education, Gartner just reported that 53 percent of Fortune 1000 companies have increased their IT budgets by more than 20 percent this year.

Why are companies increasing their spending on Internet technology when those dollars could be spent on retaining employees or could be passed down to shareholders to bolster stock prices? There is one simple answer to the question. The dollars spent on Internet technology deliver a return-on-investment so quickly, companies get their cost back out of the investment within weeks. Many CEOs now turn to their technology and information executives, saying, "Cant we do this faster?"

Large corporations are spending millions upon millions creating private networks to connect out to suppliers and customers. Cisco Systems has reportedly spent $300 million building its network. And these companies are also getting their millions back in efficiency savings. Who says the Internet is a bust?

P.S. Wonder why Ariba, Ventro and VerticalNet are doing so poorly if companies are spending so much on technology? Its because the tech dollars are now going to companies like Oracle, Microsoft and IBM, companies that have become ecommerce giants.

About the Author

Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring Entrepreneurs Guide to the Best Home-Based Businesses (St. Martins Press).

:To contact see details below.


spiegelrob@aol.com