Businesses To Drive Next Net Revolution

By Tom Kucharvy

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We are now languishing in the depths of the post-Internet bust. Times are quite different from a year and a half ago, when virtually everything about the Internet -applications hosting, B2B exchanges, wireless Internet access, even Internet portals- seemed destined to reshape the world as we knew it.

Today, of course, a dollar and an Internet business plan -hell, a dollar and an ongoing Internet business- can barely buy you a Wall Street Journal. Just what has happened to the Internet earthquake, which was supposed to rearrange the business landscape so rapidly and so dramatically? Has it expended all of its force, or is it quietly building pressure for yet another go at rattling the industry? And, if the latter, will the fault line release its transforming energy cataclysmically or in a more gradual, though still profound, way?

Whatever the Internet's future course, it is extremely unlikely that we will return to the unbridled (and unjustified) euphoria (or the naive dreams) of years past. Ultimately, the Internet will indeed transfigure the way business is conducted. How? Let me offer just a few examples of the ways in which the Internet will (not may, but will) reshape business as we know it - especially the computer and communications industries.

Before getting into how the Internet will alter the world, I must first explain my view of how it won't alter the world. We will not, at least not during the next several years, see the re-emergence of the "Myth of the Consumer Internet" - the vision of hundreds of millions of users, with Internet-enabled devices sewn into their lapels, conducting billions of online transactions and creating trillions of dollars in new revenue per day. While consumers will certainly increase their use of the Internet, this adoption will be more steady than seismic. As we have been insisting since the beginning of the Internet Age, the real shake-up will occur in business. That means that adoption will be driven not by fad or addictive obsession; but by cold, hard business benefits and return-on-investment (ROI) calculations.

Just how will the Internet transform business and our own industries? Primarily by driving all types of IT and communications industry trends to the Internet. For example, it will:

These shifts are certainly important to the IT and communications industries. They will, after all, radically alter the composition of these industries and the ways in which all vendors and providers deliver their offerings. They will meet our basic criteria for being "inflection points" that create huge new markets, change the rules of industry competition, and produce new winners and losers. But, while these changes are of great import to our own industries, they will hardly transform the nature of business in the 21st century. These are the type of under-the-cover changes that will only excite, or more likely traumatize, corporate IT and communications executives.

Let's instead focus on three Internet-based changes that are likely to rattle all industries and attract the attention of virtually all line-of-business executives, from manufacturing and sales to CEOs:

  1. The shift from automating personal and intra-company business processes to automating inter-company processes, thereby creating what we call the "extended enterprise."

    The mobilization of the workforce and the creation of the "always-on employee" and the "always-on company."

  2. The adoption of Internet applications hosting and the transition to wholesale hosting.Emergence of the Extended Enterprise
    During the past 50 years, companies have used information technology to automate, and gradually to streamline, intra-company and (with the advent of the word processor and the PC) personal-business processes. This was good, blessed by no less than Federal Reserve Board Chairman Alan Greenspan for having increased national productivity enough to allow us to grow the economy faster than previously thought possible, without increasing inflation.

    The emergence of the Internet, the creation of new generations of applications, and the type of Internet-associated architectural and application-delivery changes we have already mentioned will certainly extend these productivity gains. But, in Summit Strategies' view -after 50 years of focus on generating personal and intra-company business benefits- returns will be increasingly incremental.

    The greatest productivity and business transformation gains will come from applying the power of the Internet to another class of applications that has been all but ignored in the pre-Internet age. These inter-company collaborations or, as we call them, extended-enterprise applications, are in desperate need of automation. They have been all but ignored, however, for lack of a ubiquitous, reliable, secure and affordable communications media.

    Now that this media exists, we have seen explosive interest in e-marketplaces (although we are just now beginning to see viable business models), e-procurement, supply-chain management and customer-relationship management. We're also seeing budding interest in applications such as collaborative design and partner-relationship management. In short, companies increasingly recognize that the real payoffs will come from integrating these outward-facing applications into traditional applications and restructuring outdated business processes.

    As this shift happens, we will begin to see dramatic (albeit initially costly and painful) improvements, as well as a fundamental change in the ways companies interact with each other.

    Creation of the Always-On Employee
    This sounds ominous. We are already flooded with information, new tasks to perform and continual demands on our time. The emergence of faxes, voice mail, e-mail and cell phones has made it hard enough keep up with work. Now, pervasive computing will make it all but impossible to escape. While this upheaval will certainly create many personal traumas and force difficult management trade-offs, it could make people -and entire businesses- much more efficient.

    Pervasive computing, whether delivered via smart phones, wireless personal digital assistants (PDAs) or notebook computers with wireless modems - and whether connected over wireless WANs, LANs or PANs (personal area networks) — will transform business. It will allow field-sales and -services representatives to anticipate and immediately respond to customer needs. It will allow inventory or repair managers to track the location, and speed the delivery, of a critical shipment or component instantly. In fact, it will go beyond creating the always-on employee, to create the always-on company.

    Evolution of the Hosted Enterprise
    We all know the promise of applications hosting. It aims to free businesses from the need to develop, implement and manage their own applications and IT infrastructures. Although the transition will take longer than many had originally thought, and will probably hit most forcibly at first in enterprise departments (rather than in small and midsize businesses), it will absolutely come. It will allow businesses to implement IT solutions much faster and easier than before, and will free up enormous amounts of money and management time. Allowing resources to be applied to business needs, rather than IT requirements, will move from being an empty catchphrase to a common reality.

    Although the emergence of hosting will have an important impact on businesses in general, it will propel a much more profound shift within the IT industry. This shift will occur in two primary stages. As we all know, the early stages of the hosting movement will see the IT-platform-selection process drift gradually away from IT managers and toward thousands of independent software vendors (ISVs) and ASPs. Longer term, however, capacity service providers (CSPs) will offer comprehensive, replicable hosting platforms that are far more robust, reliable and economical than individual ISVs, ASPs, systems integrators and IT managers can develop and maintain themselves.

    These developers, therefore, will write applications atop wholesale-infrastructure platforms offered by a relative handful of CSPs. This will increasingly centralize vast amounts of IT selection and purchasing power in the hands of a small number of huge CSPs. Taken to its logical extreme, this trend could ultimately allow these providers to define, and possibly even acquire, the systems and software vendors that win the CSP infrastructure race.

    The Revolution Continues
    No, the Internet revolution that was launched in the late 1990s is not dead. But it will roll out much differently than many pundits initially projected. It will, for example, begin in business, rather than in consumer markets; and will pick up momentum primarily in departments of large enterprises, rather than in small and midsize businesses. Adoption, therefore, will be driven by solutions to pressing business problems and by hard-nosed ROI calculations, rather than by fashion or spontaneous whim.

    As a result, market and industry transformation will not be like the cataclysmic collision of the huge meteor that many believe covered the earth in clouds of dust and extinguished the dinosaurs. It will be more like a high-speed replay of the tectonic shifts that created the continents - gradual, inevitable movement; intermittently jolted by massive earthquakes and volcanic eruptions; resulting in a total transformation of the entire landscape. And the coming business Internet revolution will be just as inexorable, just as powerful and just as inevitable.

    Editor's note: This column first appeared on ASPNews.com, an internet.com site.

    Tom Kucharvy is President and CEO of Summit Strategies Inc., an independent market strategy, research, and consulting services firm in Boston, which he founded in 1984.