IDC: Vendors Must Change to Greet New 'Net

The number of people connected to the Internet will mushroom from 150 million today to 500 million [M] in 2003, but IT vendors will nonetheless have to work hard to secure a share of the exploding Internet market, market research company International Data Corp. (IDC) said today at its annual Directions conference.

"Just showing up (with an Internet presence) has been a key part of the success of the first four years of the Internet economy," said Frank Gens, senior vice president of Internet research at IDC. "But the rules for success are changing."

In particular, there will be a dramatic change in the profile of the Internet user, according to Gens. In 1999, for the first time in the U.S. the majority of Internet users will be women, he said. Another first will be a shift in nationality -- this year, over 50 percent of Internet users will be outside the U.S., he said. And the new users will no longer balk at buying online, according to Gens. In 1999, over half of U.S. households which are online will buy something online, and that figure is 25 percent worldwide, he said.

"Buying online is no longer some curiosity," Gens said. "We're not talking about the lunatic fringe anymore."

In addition to a new user face, the near future will see different businesses online than currently dominate the 'Net scene, according to Gens.

"If you are crafting offerings, product and service offerings based on companies on the 'Net today ... wait one year and you'll be dreadfully wrong," he said.

Today, finance and insurance companies have the strongest Internet presence, perhaps followed by manufacturing, Gens said. Retail is next, and last are utilities and health care, he said.

"Health care's in a coma in terms of their use of the Internet," Gens said.

But one year from now, retail and utilities will be the hot new online segments, as retailers finally decide to make the investment and utilities get a boost from the deregulation currently underway, Gens said.

These new companies -- as well as many Web old-timers -- will demand different returns for their Web investment than companies expect today, according to Gens. Vendors will be asked to deliver 24-hour uptime, additional language and currency capabilities for electronic commerce, and to convert more visitors to buyers through the use of personalized, targeted offerings, Gens said. One recent IDC survey showed that sites that have pitches and pages targeted to specific individuals have conversion rates that are much higher than other sites, Gens said.

"These (targeting) technologies have been on the margin but will be increasingly important," Gens said.

All told, the next few years will see the entrenchment of the Internet and the success of the companies who exploit it, according to Gens. That point was underscored for Gens when Reader's Digest, a publication which condenses articles for a middle-of-the-road audience and is the epitome of mainstream, announced that it would spend US$100 million [M] over the next two years to improve its presence on the Web.

"If Reader's Digest knows this, then everybody knows about the new Internet economy," Gens said.

IDC can be reached at +1-508-872-8200 or on the Web at http://www.idcresearch.com/.

Desk edit by: Elizabeth Heichler

Copy edit by: Cheri Paquet

Copyright 1999 IDG News Service, International Data Group Inc. All rights reserved.

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