IDC: E-commerce app model likely to change

Electronic-commerce applications vendors are likely to change their business model to bring in revenue from transaction charges and subscription fees assessed to customers, according to a study released Monday by International Data Corp. (IDC).

The market researcher expects revenue from e-commerce applications to reach $US23 billion by 2004, according to IDC, but analysts say they believe part of that revenue will be derived from a fee-based business model that will evolve in the next several years.

IDC expects revenue from applications licensing to drastically decrease from 90 percent in 1999 to 32 percent in 2004, while the revenue from transaction fees will go rise from 4 percent to 29 percent in the same time period.

However, e-commerce vendors will not be able to rely on application licenses as a reliable revenue source, according to Albert Pang, an analyst and research manager for the e-commerce software program at IDC.

But some vendors disagree.

"I think there are some interesting conclusions (in the IDC study), and I don't necessarily think they are right or wrong," said Barry Goffe, group manager for Windows DNA at Microsoft Corp. "I don't think one model is going to win."

Goffe thinks there should be a balance between vendors having a business model that makes them more money and efficiency for e-commerce applications customers.

So, what does that mean to the end user? Pang and Goffe agreed that the cost of charging per transaction will ultimately be passed along to the user, but not in the near future.

"B2B (business to business) will evolve first, but it will be a while until we see B2C (business to consumer) move toward that transaction model." Goffe said.

IDC also noted in the study that e-commerce software vendors should prepare for a boom in wireless e-commerce. But Goffe thinks that might be a rush to judgment.

"I definitely think that (wireless) devices will more and more become a significant driving force of how the Internet evolves, but it's too early in the evolution of the business model to tell," he said.

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