DCI - John E. Turner: The Economics of the Internet

ELECTRONOMICS - The Economics of the Internet

By John E. Turner
CEO, Network InfoServe, Inc.

We are witnessing a significant transformation in the way business can be done, since the Internet is a new medium for doing business. This resource provides the opportunity to conduct business directly with customers worldwide without a middleman, or expensive distribution channels and delays. The Internet is not only an environment for performing electronic commerce, but a resource that can be leveraged inexpensively to share and interact with information globally with customers, business partners and employees.

The Internet can be used to strengthen a company's competitive edge. A company can establish itself as a leader in its industry through effective use of the Internet. By establishing a presence on the Internet, a company enhances its image in the eyes of both customers and competitors as a cutting-edge organization with technological savvy.

HOW IS THIS TECHNOLOGY APPLIED?

Internet Service and Support Systems
Internet service and support systems have been implemented by numerous types of companies, including shipping, financial, software, computer hardware and others. These systems have been used to extend better service to customers and make the best use of company resources. Organizations have also benefited within their own companies by improving internal communications.

Common functions being implemented by these types of systems include:

Integration with Order Entry and other back office systems. After orders for products or services have been placed, customers can track the status of those orders themselves. The organization thereby conserves customer service resources while at the same time providing more information to the customer more conveniently.
Postings of Frequently Asked Questions (FAQs). These postings provide a list of commonly asked questions with answers related to specific topics. This allows customers to answer their own questions and have the opportunity to quickly understand the scope of issues related to that topic.
The use of real-time chat forums. These forums provide value to the customer by enabling the opportunity to exchange dialogue with industry experts. This benefits the company by making the best use of important resources and providing the experts an opportunity to collaborate with potential or existing customers as well as to calibrate market trends.
The application of Usenet newsgroups to allow user collaboration. Newsgroups allow a user community to collaborate amongst themselves in a specialized area.

Information Distribution Systems
Electronic information distribution and management are being effectively used on the WWW by a wide variety of companies. The media (TV, news, entertainment, sports) and publishers (book, magazine, newsletter) are the most prolific. However, due to the low cost nature of the Internet, this medium can just as easily be leveraged by any industry to satisfy a similar purpose. In other words, companies don't have to employ media or publishers to secure exposure on a national or international scale.

Through the Internet and WWW medium, many types of companies can make available any and all information required by their customers, employees, vendors and business partners. Access to the various materials can be controlled through selective registration and membership. Information frequently includes company demographics such as company overview, financial performance, marketing literature, product specifications, service offerings, engineering specifications and project documentation.

These abilities provide companies with newfound capacities:

Convenience is enhanced. Users have access 24 hours a day, 7 days a week. This information is immediately available in virtually any location in the world.

Resource requirements are greatly reduced. All of this information can be found and distributed without any involvement of company staff.

Time delays are minimized. The time required to exchange information is reduced by making it instantly available on the Internet compared to traditional methods such as mail or express mail.

Cost savings. Costs for printing, production, handling and administration, and postage are virtually eliminated.

Internet Merchant Systems
A large number of manufacturers, distributors, mail order cataloguers, online mall operators and retailers are leveraging the power of the Internet with a variety of products and services. Many of these organizations have been lured to this medium because of the following benefits:

The Internet marketplace is global and operates 24 hours a day and 7 days a week at very little or no additional cost.
Product and price adjustments can be made quickly and easily in response to changing market demands.
Because of the fully automated sales cycle initiated by the customer, the cost and time required for the company to fulfill customer orders is reduced.
Use of the Internet reduces the cost of phone lines and toll-free 800 numbers. Credit card orders can be processed without human intervention.
Printing and production costs, fees for mailing lists and postage costs for sending out printed catalogues on demand are virtually eliminated.
The time-to-market is reduced to enable these benefits.
The WWW provides a consistent and familiar interface to users. A user can access multiple companies and still be using the same browser.
Systems can incorporate granular demographic information about users (i.e., who came, where they went, how long they were there, what they viewed, etc.). This provides an organization the opportunity to constantly recalibrate and improve its message and delivery to individual users.

Exploiting these types of benefits using conventional environments (call centers, retail centers) has traditionally been much more costly and resource intensive.

WHAT SHOULD A COMPANY BE CONSIDERING?

With the Internet's expansion in size and capabilities, focus not only on the immediate implementation details and benefits, but also establish a strategic vision in this emerging environment by focusing on long-term opportunities. Based on the author's observations and experience in providing custom business solutions, the following issues should be studied by companies pursuing business opportunities on the Internet.

Consider investing in developing company expertise in understanding what the Internet is and how it can be applied to your business. The WWW is just one of the early popular faces of the Internet. Organizations will have to keep their eyes open because there are no constants in the Internet environment -- it's supersonic.

Refresh intriguing content that attracts Internet users to come back. Systems must include enticing content with easy and terse navigation. Content must be revised periodically so that users have reasons to come back.

Establish demographics-based WWW systems. Demographic-based systems can be either generally oriented or membership oriented. General (no log-in required) systems can provide basic demographic information of who was on your system, where they came from (domain), what pages they went to and how much time they spent there. With registration, membership systems can provide you additional information (street address, phone number, etc.). Organizations can then create the necessary reports to analyze the impact of the systems.

Establish a sound vehicle for deployment: a robust application development architecture. The ability of your organization to react quickly in implementing and maintaining applications on the Internet is imperative. Application development architecture can include database integration and opportunities for integrating existing systems and external systems (e.g., EDI). If your organization does not have expertise in this area, partner with the right organization!

Implement robust security for a business environment. Implement all aspects of security when doing business on the Internet: internal security policies within your environment, Internet firewall provisions, message integrity and encryption, and certification and authentication of user/buyer and provider/seller.

Create a stable operational environment. Company systems may be used 24 hours a day, 7 days a week; therefore, it must be sufficiently robust to do business. In addition, the system environment will require the ability to proactively deal with hardware, software and network failures to minimize down-time.

If you are currently using Electronic Data Interchange (EDI), consider using Open-EDI over the Internet. Organizations who have EDI integration in place can benefit in two ways by using the Internet: 1) bypass paying Value Added Networks (VANs), and 2) simplify implementation by consolidating to one entry point -- the Internet.

Manage risk, if necessary. Begin building high-risk systems (e.g., million- and billion-dollar money transfers) on an Internet-enabled architecture and facilitate it through a private network. When the time comes that the risks are manageable, your organization will be in a position to immediately launch the system on the Internet.

Along with the opportunities of doing business on the Internet come a new set of challenges. The Internet is not only available to your company, but to your competitors domestically and internationally as well. In other words, your competitor can attain the same advantages that are available to your company. Therefore, it is imperative that companies 1) understand this new medium, 2) learn how to effectively do business in it, 3) act quickly and decisively toward implementation, and 4) remain nimble in an increasingly changing environment.

[The preceding is an excerpt from a white paper by John E. Turner, president of Network InfoServe, Inc., an information technology consulting firm based in Tampa, FL. For additional information, contact the marketing department at morgansm@niicorp.com, (813)229-1178 or visit http://www.niicorp.com.]

John E. Turner is featured at DCI's Internet Expo.