E-marketplaces set to crash
The dotcom market is heading for a second crash as companies in the much-vaunted business-to-business (B2B) marketplaces struggle with a limited take-up.
That was the stark warning from Gartner Group this week. The company also urged European governments to overhaul both their e-business strategy and their regulatory frameworks to boost growth in the new economy.
Despite the hype and a flurry of investment in B2B services, according to Gartner, the actual value of transactions, particularly within e-marketplaces, is still very low. It predicted the B2B market crash could be less than one year away.
As recently as this spring, only an estimated 25% of all European e-marketplaces were actually conducting transactions and only half will be doing business online by the end of the year, Gartner claimed.
The company also predicted that a growing number of companies will start to double their e-commerce investment over the coming year as the complexities of e-business investment sink in.
According to Alexander Drobik, vice-president of business management at Gartner, “The crash will be more subtle than the B2C crash. There is still a lot of investment and people setting up business plans. But venture capitalists are getting more ruthless,” he said. Gartner also called on European governments to step up e-business investment and focus their efforts more clearly.
Flexible competition laws and employment schemes to combat the e-business skills shortage were among areas for government action highlighted by Gartner.
ISPs to beat the banks in online market
Internet service providers (ISPs) are set to dominate the lucrative wireless banking market at the expense of high-street banks.
That was the banking industry wake-up call issued by Gartner Group. Gartner predicted telecom ISPs will pose a 26% greater threat to retail banks in 2003 than they do today. The threat will ride on the back of an explosive growth in mobile banking and wireless devices. By 2003, the number of mobile banking users in Western Europe will outstrip the number of Internet banking customers, Gartner claimed.
And by 2003 more than two-thirds of the European population will also have data-enabled mobile phones, Gartner forecasted. As traditional banks no longer have first-mover advantage, ISPs will attack the new wireless banking market by taking advantage of their technology infrastructure and customer loyalty, according to Gartner.
Gartner analyst Laura Starita said, “The established banks will keep their core competencies of high-end risk management, portfolio management and regulatory compliance. “However, the portals have big opportunities to provide micro-payments, authorisation, low-end risk management and transaction processing. This could make them the preferred point of contact for existing traditional bank customers,” she said.
Starita added that ISPs could cut banking charges and overheads by charging customers for goods, based on the price of the call, plus a charge for processing payments. ISPs could also run credit lines and offer personal loans using this charging method, conference delegates heard. It was stressed, however, that banks are aware of the threat to their market and are partnering with some of the major ISPs.
Deutschebank and AOL, for instance, are developing wireless banking in Europe while ABN-AMRO has entered a joint venture with KPN to develop a pan-European banking portal. But Starita warned that the wireless banking revolution does face obstacles. She cited establishing a common infrastructure for processing customers’ micro-payments as one example.
Growth in e-tracking to allow closer customer scrutiny
In five years time companies will be able to capture 30 times more data about their customers, due to online tracking and embedded sensors, Gartner Group predicted. But the company also warned that the revolution in data capture raises major privacy and legal issues for companies to grapple with.
By 2010 some 70% of the population in developed nations will spend 10 times longer interacting with people in the e-world than in the physical one, according to Gartner’s predictions.
The successful companies of the future, Gartner argued, must grasp the needs of customers and employees interacting in virtual communities, dubbed the “always-on” environment. But they must also ensure their customer-tracking technology remains within legal and civil liberty boundaries, Gartner urged.
According to Alexander Linden, senior analyst at Gartner, “The always-on environment with the growth of targeted and relevant information means people’s attention will be a scarce commodity.”
He added, “Only by redesigning their businesses and by totally rethinking their processes and consumer models will companies harness the full benefit of customer tracking technology. The key issue is shifting from what is technically feasible to what is socially and legally permissible,” he said.
“Those who fail to address privacy implications when evaluating customer-facing technologies risk seeing the entirety of their IT strategies derailed.”
ASPs vital to e-trade growth
Application service providers (ASPs) should form an integral part of future e-business projects, Gartner Group has urged.
Predicting the e-business landscape of 2005, Gartner believes that the intricate integration demands of e-business projects will be too complex for suppliers and consultancies to deliver without the help of ASPs.
Peter Sondergaard, general vice-president at Gartner, said, “Despite the ‘all-singing, all-dancing’ sales pitch of the big application vendors, no single packaged application source will represent more than 40% of a firm’s application requirements.
“By 2005, critical investment and strategic decisions around integration efforts will be twice as complex for enterprises as yesteryear’s enterprise resource planning environment.” But IT managers should be careful when choosing which ASP to partner in such a fast-changing market, Gartner warned. It predicted that, by 2004, more than 80% of existing ASPs will have either gone to the wall or have been consolidated.
Companies should include contingency plans in their ASP arrangements as insurance against such volatility, Gartner advised.
By 2005, we will also see the emergence of three main e-marketplaces, according to Gartner. They are businesses services, to support the supply chain; commodities, replacing markets and auctions; and integration services.
In the new e-marketplace traditional bricks-and-mortar companies have the advantage over dotcoms due to factors such as brand identity and their size.
Sondergaard said, “The future will belong to hybrid brick-and-mortar-type businesses. Pure dotcom companies must overcome their disadvantages in brand identity, economies of scale and retained expertise by offering added value in other areas.” Gartner also predicted that the rise of the Internet and wireless sector will place a greater importance on “client-focused” applications.
This was first published in November 2000