Remember how the world was going to change? Smart sensors in
your refrigerator would notice that your milk freshness date
had expired and it would add a half gallon to your electronic
shopping list. As items gathered, you would click the list
over to WebVan, which would bring groceries to your door.
WebVan, of course, is gone, and my refrigerator certainly
doesn't have any sensors.
The WebVan demise produces two responses. The I-told-you-so
group gets one more example to support its belief in the
utter weakness of the Internet. This group never believed for
a second any of the sweeping claims of the new, new economy
and the transformative power of a fully connected world.
The head-in-the-sand group gets to explain, yet again, that
WebVan's problem was weak management at the top. The
executives betrayed a great idea with their stunning
incompetence. This group believes the Internet has already
conquered the world and that the distraction of WebVan's
collapse clouds the clear success of the Web.
I'm still struggling with a third point of view, which goes
something like this: We don't know yet where and how the
Internet will affect our lives, but eventually, there will be
profound changes. Television has certainly had a profound
effect on all of us, and the Internet is like a few hundred
potential TVs. Only right now, we don't know which of these
will take root and grow.
There are two clear winners already. Both of them have
affected business more than consumers. One is email, and the
other is business-to-business ecommerce. Email has connected
family and friends in a new manner, which helps in a world
where children typically live in different states than their
parents. But email is not equal to the telephone in its
ability to let family and friends really communicate.
For business, however, email has completely eliminated the
typewriter. Business correspondence, proposals, blueprints,
legal briefs, all of these standard business communications
now travel over the Internet delivering considerable savings
to both the sender and the recipient. Count me among those
who are convinced that email is truly the Web's great killer
application.
The other area of the Internet's phenomenal success is
business-to-business ecommerce. This may seem a strange
statement, given the absolute crash of the dot com world and
the beating taken by virtually every public tech company.
Mention the word e-marketplace and people snicker. Companies
like Ariba, Ventro and VerticalNet were considered giants
just a few months go. Their companies were going to be the
next generation's GMs and GEs. Now they very well may be
moving along the same sorry path as WebVan.
But something very big is happening within companies, and it
is going on very quietly. Ten years ago, companies allocated
about 10 percent of their capital spending to information
technology (IT). IT these days is virtually synonymous with
Internet technology. This year, IT spending constitutes more
than 50 percent of all corporate capital spending. And even
while corporations are laying people off and cutting spending
on everything from new facilities to professional education,
Gartner just reported that 53 percent of Fortune 1000
companies have increased their IT budgets by more than 20
percent this year.
Why are companies increasing their spending on Internet
technology when those dollars could be spent on retaining
employees or could be passed down to shareholders to bolster
stock prices? There is one simple answer to the question. The
dollars spent on Internet technology deliver a
return-on-investment so quickly, companies get their cost back
out of the investment within weeks. Many CEOs now turn to
their technology and information executives, saying, "Can't
we do this faster?"
Large corporations are spending millions upon millions
creating private networks to connect out to suppliers and
customers. Cisco Systems has reportedly spent $300 million
building its network. And these companies are also getting
their millions back in efficiency savings. Who says the
Internet is a bust?
P.S. Wonder why Ariba, Ventro and VerticalNet are doing so
poorly if companies are spending so much on technology? It's
because the tech dollars are now going to companies like
Oracle, Microsoft and IBM, companies that have become
ecommerce giants.
