Metcalfe's column: Internet users to hit 500 million

Thinking that you could use an update on internet commerce, I packed up my PowerBook and headed for an information technology conference in, of all places, France.

This was my fourth year at the European IT Forum, organised by the IDC market research company. IDC is an InfoWorld affiliate, and I serve on its board.

Here are some highlights.

Arriving in Paris, I was rudely reminded that they still speak French there. Fortunately, I was attending an internet conference, so most of the speakers at the conference were American. Most of the 1000 attendees were European, and although they weren't entirely happy about it, they spoke English too.

French is spoken at the many McDonald's restaurants around Paris. Parisians in large numbers enjoy the European delicacies served at McDonald's -- hamburgers and french fries at Scottish prices. But, they seem to hate Americans for making them do it.

The theme of this year's forum was Internet Commerce 2.0, which probably upset French isolationists even more. By the end of 1998, according to IDC, the Web had 160 million users and $US50 billion worth of commerce, half in the US, much less in France. By 2003, the Web will have 500 million users and $1.3 trillion worth of commerce. Whoa!

But wait. MIT Media Lab founder Nicholas Negroponte and Compaq CEO Michael Capellas, among other speakers, said IDC's forecasts are way too low.

So, whatever France does, I-commerce is going to be big. What you have to be careful about, Douglas Aldrich of AT Kearney warned, is getting "Amazoned".

IDC internet chief Frank Gens urged that information systems professionals should not lead companies into Internet Commerce 2.0. Instead, CEOs should handle the large investments and complicated coordinations commitments.

Gens says that investments in today's 52x7x24 sites are running between $1 million and $30 million each, followed by 50 per cent to 100 per cent of that again annually thereafter. The good news is that they are, in increasing numbers, turning profitable.

Mike Zisman, strategist at IBM/Lotus Development, reported that companies are now searching for "sweet spots", diversifying revenues out of advertising and into a mix of subscription and transaction revenues. Yahoo CEO Tim Koogle, whose ad revenues are booming in 19 countries, said the same, which by the way is what I've been telling you. Dell CEO Michael Dell reported that 40 per cent ($11 billion) of Dell revenues are now from internet transactions.

Zisman spoke about the internet's lowering of transaction and coordination costs. This enables companies to outsource to internet application service providers. The next step is full-blown business process outsourcing. Hewlett-Packard's Karen Slatford said HP is taking more compensation as a share of increased customer profits as part of its new e-services outsourcing thrust.

Many speakers agreed that internet investments be made not only in virtual resources, but also in real ones: for example, warehouses. Sun Microsystems CEO Scott McNealy said it best: "Invest in clicks and bricks."

MIT economist Lester Thurow contrasted US governments with those in Europe -- like France's -- that control too much and are reluctant to destroy the old. So, when EDS CEO Richard Brown said that internet businesses must work with governments, I thought: No.

Having just been through passport control, heard the fuss in Paris about hormone-treated beef, and watched US politicians get interested in the internet, I'm beginning to think again that the best policy is not to let those people into your offices. Trying to work with governments only seems to encourage them to do what they call help.

For more European IT Forum highlights, see www.idc.com/Technology pundit Bob Metcalfe is semi-lingual. He enjoys pointing out that even the French word "bistro" is from the Russian meaning "quickly", as in fast food. He welcomes e-mail in American at metcalfe@idg.net/

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