Dot-Com Deaths Won't Kill Internet Economy

The high-profile deaths of a few big-name dot-com retailers don't foreshadow the end of the Internet economy. In fact, a new study suggests electronic commerce will become the industrial revolution of this century.

The Internet economy continues to grow robustly, with both new and established companies reaping profits online, according to a new study from the Center for Research in Electronic Commerce. E-business still has huge untapped potential, says Dr. Anitesh Barua, associate professor of information systems at the center. He believes its effect on the industrial economy will be as significant as the shift from the agricultural economy.

Barua discussed the Dell-sponsored study during the company's press gathering here to announce its new business-to-business integration packages. Bundled services and equipment, starting at US$10,000, are designed to help businesses implement online commerce and procurement services.

Dot coms are a very visible but small part of the overall Internet economy, and their failings are overplayed in the media, he says. "The dot-com economy is not crumbling," Barua says.

A great many dot-com businesses are doing well, he adds. They're running with sound business practices, and they're doing it without cash from venture capitalists. An upcoming study from the center will examine the once hyped and now panned e-retail industry.

Better Bottom Line

The center completed its research in September with help from more than 1200 small, medium, and large businesses in the United States and Europe, Barua says. The bulk of the study focuses on the positive impact the Internet is having on everyday businesses, big and small, he says. This isn't just about selling something online, he notes; it's about companies taking business processes onto the Internet, streamlining them, and increasing profits.

For example, large companies that implemented new Internet technologies (such as improving their supply chain processes) saw improvements of 13 to 21 percent in financial performance measures. (These measures include revenue per employee, gross margin, and return on capital investment.) When you're talking about multibillion dollar companies, that's some serious money that can dramatically improve the bottom line, as well as the economy as a whole.

The Internet can have an even larger impact on smaller companies, which often do not face the same infrastructure difficulties of larger firms, Barua says. A small company that plugs the Internet into its business model can achieve greater market share and visibility, and can reach new markets better, he says. In the study, small businesses (with annual revenues of less than US$10 million) saw average improvements of 40 to 50 percent in financial performance.

What Does It All Mean?

The Internet economy will affect you, Barua says.

Some of us will be customers who get a better price, a custom product, or better service experience thanks to a company's more streamlined and efficient Internet-based process. This will become even more noticeable as more services move to the Internet, he says.

Others will enjoy e-business as an employee. Some people worry the Internet and technology will eventually cost them their jobs, but the key is to find ways to use technology to make you more valuable to your company and your customers. "The sales force isn't going to disappear; we'll still need the human relations," Barua says.

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