Commentary: The future of e-commerce in a broadband marketplace

David Murphy of Tivoli Systems gives his views on the near-future of the broadband market, as well as related issues on security and ASPs.

"Over the next couple of years, well over a trillion US dollars a year of transactions will be conducted electronically," says David Murphy, Senior Vice President, Corporate Development of Tivoli Systems

As organizations become increasingly reliant on technology, IT professionals need to cope with an escalating number of day-to-day operational issues.

Austin-based Tivoli Systems is an IBM company which provides end-to-end systems management solutions for companies to manage their IT infrastructure.

"We see a shift in the e-business marketplace where companies today do not hop onto the e-commerce bandwagon to save money but to create value-add services and retain customers."

-- David Murphy, Tivoli Systems Inc. 

This year, Tivoli is stepping up its focus on B2B e-markets and consumer e-homes, redefining how it can enable its customers to bridge the gap between the rapid evolution of technology and the ability to capture real business value.

Tivoli solutions include security management, storage and mobile devices.

Senior vice president of Corporate Development for Tivoli, David Murphy, claims that over the next few years, more than a trillion US dollars a year will exchange hands electronically.

"We see a shift in the e-business marketplace where companies today do not hop onto the e-commerce bandwagon to save money but to create value-add services and retain customers. In the home environment, we see a very significant shift in the number of online users worldwide."

According to Murphy, there are currently about 100 million Internet-connected homes worldwide and this is expected to surge to 700 million by 2006.

The broad momentum

Many companies today are increasingly deploying cable modems, wireless and satellite-based infrastructure in their business environment to ride on the current explosion of connectivity via high-bandwidth access. Moving forward, most homes and people will be connected through broadband rather than narrowband access.

"E-commerce in Asia is anywhere from 2 to 3 years behind North America and Europe. That gap is still there but it is shrinking very fast,"

-- David Murphy, Tivoli Systems Inc. 

Asia is anywhere from 2 to 3 years behind North America and Europe, says Murphy, highlighting that the main issue is one of skills, though the gap is fast shrinking.

Huge investments have gone into the building of e-commerce and broadband infrastructure to create interests and opportunities in e-Commerce.

Tivoli’s business in Asia Pacific is growing faster than in any part of the world and within the region, Southeast Asia is the fastest growing.

"The momentum is clearly shifting," adds Murphy.

To survive and compete in today’s e-business world, Tivoli is seeing an increasing number of brick-and-mortar companies forming their own Internet/e-commerce division.

"But it gets very hard for a brick-and-mortar company to do it alone," says Murphy. "Based on the kind of management and internal capabilities that traditional companies have, it is a challenge to make the new e-business successful and flourish. With this, I think we are going to see more strategic partnerships being formed just like what we have seen in North America and Europe."

B2B has always dominated the e-Commerce market while the B2C environment is still struggling with securing robust and uncumbersome technology. In a B2C environment, the biggest challenge is on making the adoption of new technology as easy as possible so that people do not view that they have to learn a whole new technology in order to take advantage of the Internet.

"From a consumer standpoint, I think broadband wireless is more likely to drive e-commerce than companies just setting up e-marketplaces that are consumer-oriented," comments Murphy.

Don't go big, go broad

For companies implementing their e-Business strategies for a broadband world, Murphy highlighted three key challenges that companies will face.

Firstly, the business environment for e-commerce and broadband has to be reliable. In today’s seamless business environment, it is very easy for businesses to switch between supply chain partners and for consumers to switch between providers due to their lower tolerance level for slightly less inferior service quality. As such, there has to be a very reliable underpinning of technology.

Second, the challenge is for many companies to put together the right set of services in the B2B and B2C environment. It is very important for them to understand how to differentiate and add value to their customers and suppliers.

Third, security and the ability to personalize technologies for these environments are important factors. There is a lot of concern on how to personalize and ease online transactions while at the same time, keeping all the vital data/information private.

Business security

Security continues to be a growing concern for most enterprises; increasingly receiving the attention of CEOs and top executives. Five years ago, most people built very strong walls around their business environment and created very high entry barriers.

"As long as there is a set of people who enjoy demonstrating that decent environments are insecure, then the level of adequacy keeps escalating."

- David Murphy, Tivoli Systems

Management attitudes to the changing security environment are conditioned by the historical difficulty and expense of enforcing security consistently across multiple systems on multiple platforms. End-users, whether employees at work or consumers at home, also object to working with multiple intrusive security procedures.

"These mindsets have to change," says Murphy. "Companies need to adopt a policy-based security approach that allows them to authenticate and keep the environment secure with built-in security tools. Related to that, there is also an element of risk where intrusion prevention and detection is vital, and violation pattern has to be carefully monitored. To avoid impeding customer satisfaction, companies can put in place non-intrusive detection technologies such as on the network or applications and detect certain signature patterns."

IBM, Tivoli's parent company, is able to detect certain signature or intrusion patterns in a research environment using a risk management technology that basically collects all the data from multiple places, filters down and then analyses them to see if the signals warrant attention. This enables easy identification of security loopholes along a supply chain and facilitates quick action or investigation.

Adequate security is an absolute pre-condition for responsibly carrying out business transactions online.

It is certainly the case that any organization deploying information systems needs to consider security issues. However, if the organization has any online deployment at all, that consideration is essential and it is not overstating the case to say that adequate security is an absolute pre-condition for responsibly carrying out business transactions online.

"At this point, I do not think there is anything that I would consider to be called 'adequate' security. The authorization process is very important and there has been a lot of work being done on this front-end but to help securing the environment right now, we would like to see our customers build in as many intrusion detection tools/systems as they possibly can. Then the issue is how do you manage and filter all the false positives and information," explains Murphy.

"In fact, there are many people out there carving a career out of hacking and this is not expected to go away. As long as there is a set of people who enjoy demonstrating that decent environments are insecure, then the level of adequacy keeps escalating."

Pervasively moving forward

Today, new intelligent, portable devices and more bandwidth are giving people instant access to information anytime, anywhere - regardless of where it is stored-revolutionizing the way we live and conduct business. Companies have no choice but to evaluate and integrate new technologies that will move their business forward.

The predominant opportunity in pervasive devices in Asia is going to be built around wireless. The next generation of mobile phones is expected to merge with PDA-like technology.

"I think opportunities for pervasive computing can be extended to the home and cars via cable modems. Though still at the infancy stage, all the telecommunication companies that Tivoli is currently working with are trying to get the broadband infrastructure in place to allow that to take off. Once the infrastructure is in place, you can very quickly start to see innovations springing up in the consumer marketplace," says Murphy.

For businesses, the struggle to incorporate pervasive devices into their existing business models presents serious challenges:

  • How quickly can the devices be rolled out to users?
  • How do you track what you have?
  • Time to market of rolling out new or updated applications
  • Around the clock operations: improved customer service and increased availability
  • Providing secure access to information

ASPing for too much?

Much has been said and reported that most ASPs will die by year 2003. As increasing number of ASPs are moving into wireless and broadband markets, will the same fate befall them?

“I think a very large percentage will fail because the business model is not clear and the underpinning technology is weak."

- David Murphy, Tivoli Systems

“Just like any other market trends, there is probably capital inflow to allow the market to create more ASPs than it makes sense. There is a certain group of players who have the right technology and commercial skills in building scalable ASP solutions who will tend to be successful. And there is another whole tier of players who are there just to make quick money and to attract a certain amount of initial attention and success but do not have the required competence to provide scalable solutions and sustain the business. This is prevalent in all markets and is not an Asian statement,” explains Murphy.

“I think a very large percentage will fail because the business model is not clear and the underpinning technology is weak. So, I think the statement is true especially for those who do not have a clear business model and good understanding of how an ASP business actually works.”

“Nevertheless, I think there will be some consolidation in the ASP market with the more successful ones scooping up those who have good business models but businesses did not take off, and with more players forming strategic partnerships with one another. I don't think there is any single company that is skilled enough to standalone in an ASP market. Tivoli is much happier being part of ASP partnerships and not be a competitor,” he chuckled.


About Tivoli
Tivoli Systems Inc., is an IBM company that provides cross-platform management solutions that enable companies to manage their networked PCs and distributed systems remotely.

Tivoli also provides a variety of solutions for small-to-medium-sized businesses, aimed at IT management of processes.

Tivoli has grown from a start-up since its inception in 1989. This year, the company expects to do over US$2 billion in business based on its commercial capabilities on building new services.

About David Murphy

David Murphy is senior vice president, Corporate Development for Tivoli Systems Inc., an IBM company headquartered in Austin, Texas.

He is responsible for Tivoli's business and technology groups that are expanding the company into the e-zone: telecommunications / service providers, Wweb-based management, pervasive computing, security and e-marketplace products. He also runs Tivoli's corporate strategy and business development areas.

Before joining Tivoli Systems Inc. in 1998, Murphy was head of the private equity investments group at Perot Systems Co.'s private equity investments group, and he led the formation of an innovative co-investment approach where Perot Systems invested in turnaround opportunities along side established equity patrons.

Prior to joining Perot Systems, he was a partner at McKinsey & Company, Inc., an international management consulting firm, where he specialized in technology and served several leading companies on a broad range of strategy and organizational topics.

Murphy has also held development positions with Schlumberger Ltd. and IBM.

He is a passionate golfer and is looking forward to the day when virtual golf can be played on all international flights.