Through the stream of headlines chronicling the latest mood swings
in the international markets, it is easy to lose sight of the real
Internet story.
For business, the fundamental drivers behind the Internet remain as
attractive as ever. At its heart is the promise of new markets,
reduced costs and increased competitiveness. But many business
people feel it has promised much and delivered little. There is a
real disappointment that is now hindering the development of the
Internet.
An explosion in the amount of information being carried by the
Internet is taking place. The volume of data is growing at 75% a
year. Government figures show more than 81% of businesses in the UK
now have Internet access and 66% have a Web site.
So, where are the new levels of productivity powered by online
trading, e-procurement and the more efficient management of
customers?
The reality for most companies is that use of the Web has been
limited. Apart from e-mail, their Web presence is passive. Most
sites are simply online brochures. According to the Department of
Trade & Industry, only one in four businesses use their site
for active trading or supply chain management.
E-commerce is being held back by three central problems:
- The cost of implementation
- The IT skills shortage
- An immature Internet industry.
The issue of reliability is for business, central to the future of
the Internet. Any conversation about e-commerce quickly turns to
complaints about slow response times and of Web sites that go down.
It adds up to a substantial drain on management time.
This frustration is compounded by the shortage of IT professionals,
and the costs involved in recruiting them to work in house.
Research house IDC estimates that there will be a shortfall of some
300,000 skilled IT workers in the UK by 2003, with the result that
an IT manager can now command an average salary in excess of
£70,000.
For those companies with their own in-house e-mail or Web hosting
solution, the challenge of running a watertight e-commerce strategy
becomes even more daunting.
Lastly, the Internet industry has failed to help itself. It has not
communicated with companies in the business language they
understand. Companies don't want to know about routers, points of
presence and switching but about investment returns and
profit.
These issues mean businesses are missing out on the full potential
of the Web. But in outsourcing there is now an alternative. A new
generation of companies, such as Netscalibur, are redefining the
quality and cost of Internet communication services. They are
delivering services that have the high levels of reliability
essential to the success of e-commerce.
At the same time outsourcing avoids the prohibitive cost of
building an in-house solution. The economics are compelling.
Research published by Morgan Stanley has shown a typical company
can save £67,000 a year by outsourcing its Web hosting needs.
These basic economics are driving a European market that is growing
at 57% a year. The Internet service providers (ISPs) which will
succeed in this market are those that invest in the skills to build
quality services and in customer support to give businesses
responsive and relevant advice.
The incentive for businesses to get it right when choosing an ISP
takes on increasing importance as consolidation takes hold in the
ISP sector. As high profile service providers continue to go under,
businesses demand to know that their outsourcing partners are still
going to be around in six months' time. End business users will
only get a decent level of service out of profitable ISPs.
The real economy is still relying on the Internet to deliver on its
promises, whatever the volatility of the international markets. The
issues of cost, skills shortages and IT technobabble have been a
brake on realising the full benefits of the Internet, but as the
Internet industry begins to mature, business-friendly solutions are
increasingly emerging.
Adair TurnerAdair Turner is a former director-general of the Confederation
of British Industry and a director of Netscalibur.