IT May Ache When the E-Party Is Over

FRAMINGHAM (04/03/2000) - Notwithstanding the difficulties in engineering e-commerce applications, the track to building them has been one cushy ride on the gravy train. Basically, the classical test of worthiness of IT investments - accountability - has often been only leniently applied to e-commerce projects.

Fasten your seatbelts, because the ride is about to get a whole lot bumpier.

There are many indications that investors and company executives are going to demand much more accountability (as in profits) from their prodigious e-commerce investments. For IT, this could spell a whole new round of headaches and demands.

Data presented at the recent International Data Corp. (IDC) Directions 2000 conference revealed that executives expect your e-commerce sites to make money, and soon. Imagine that! IDC sampled opinions of executives who own the budget for online business at more than 600 companies. Sixty percent of them said they expect their firms' online businesses to be profitable by the end of next year.

I found that amazing because hardly any make money today. Such expectations are sure to put increasing pressure on IT to help deliver profits.

Also, investors that had outrageously bid up the value of dot-com businesses are beginning to smarten up. Prominent Wall Street analysts, who control the ebb and flow of so much investment money, now say that upward of 75 percent of Internet companies will never make money. Many of the same analysts who helped drive the absurd values of many Internet companies now lament that they're overvalued. This could translate into stingier budgets for e-commerce infrastructure or far greater accountability for such outlays.

Finally, the poor showing of many business-to-consumer Internet companies in fulfilling orders during the holiday season reinforced the idea that many dot-com wonders are just flashes in the pan. There is a growing belief that in business-to-consumer e-commerce, what will emerge is a small number of giant conglomerates like Amazon or eBay, with everyone else either striking partnerships with the giants or simply disappearing.

These are quite different and sobering versions of e-commerce reality than you've been accustomed to reading and hearing. For example, conventional wisdom formerly held that Internet technology would spawn countless competitors in one of the truest expressions of free-market capitalism. If the aforementioned oligarchy model prevails, what effect would that have on your e-commerce system development strategies? If your company's role ultimately is more of a subordinate to giant "anchor" sites or portals like Yahoo or Amazon, should you be building the infrastructure any differently than if your company operated more independently?

I believe that, at a minimum, IT managers responsible for the build-out of the e-commerce infrastructure will need to focus as much as ever on basics, including building their sites not in isolation, but tightly integrated with existing back-office systems. Tight integration is the only way you can hope to gain the accountability that will be demanded going forward. Only 22 percent of the IDC panel viewed their online businesses as independent of internal, integrated systems.

The bottom line is the bottom line, which for a variety of reasons now is likely to reinsert itself as a key IT performance benchmark for e-commerce systems development.

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