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Through the stream of headlines chronicling the latest mood swings in the international markets, it is easy to lose sight of the...

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 Turner

Adair Turner is a former director-general of the Confederation of British Industry and a director of Netscalibur.

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