Future Net: 'Dot coms' could face revenge of dinosaurs

The Net has revolutionised every sector of US business. But a counterrevolution might be on the way.

To hear them tell it, the "dot com" companies of the world hold all the cards against big business. They're nimble and quick-footed, have the youngest and brightest talent, aren't bogged down by corporate bureaucracy and truly understand the Internet. Why don't the corporate dinosaurs just roll over and die?

Those statements may have held up a year ago, and may still ring true in some sectors today, but by and large the Fortune 500 are beginning to roar back against their "dot com" competitors. In fact, a reverse school of thought is beginning to emerge that in the long run, the corporate giants will have the staying power and financial resources to crush the upstarts. Get ready for the revenge of the dinosaurs.

"Big business isn't asleep at the wheel anymore," says Reginald Foster, chief e-commerce officer at consulting firm American Management Systems. "What I think we're going to see in the year ahead is an onslaught of traditional companies launching assaults against the newcomers.

"They may be behind in many cases, but an awful lot of what is being done right now can be copied. That's when you'll start seeing the brand name power, the corporate infrastructure and the staying power of the big corporations winning the day," Foster says.

In just about every major industry, from manufacturing to financial services, consumer goods and energy, "dot com" companies have emerged to shake up the status quo. Few will deny they have the first-mover advantage and an early lead in technology, but the game, as IDC analyst Frank Gens says, is barely a few minutes into the first period.

Even Ariba Technologies, a company widely recognised as the 800-pound gorilla of the electronic procurement market, has just 40 customers to its name. Compare that with an incumbent like SAP, which claims more than 11,000 customers for its enterprise resource planning systems. Those are customers to whom SAP arguably has a built-in advantage to market its own electronic procurement platform.

In the retail space, where the running theme is "who will be Amazon-ed next", traditional retailers are beginning to strike back on their own or through strategic partnerships. Witness such combinations as Drugstore.com, GNC and Rite Aid -- or the pairing of Petsmart, the largest US retailer of pet supplies, with venture-backed Petjungle.

Federated Department Stores, operator of such industry stalwarts as Macy's and Bloomingdale's, instantly became a major player in the electronic commerce arena earlier this year when it purchased Fingerhut, a direct-marketing company.

With the deal, Federated gained not only an operation to handle the distribution of products purchased over its own Web properties, but also a piece of the booming Internet logistics business and equity stakes in a half-dozen Web retailers.

It's exactly these kinds of advantages that will widen the gap between traditional retailers and start-ups in the years ahead, Forrester Research analyst Charlene Li says. In fact, she says, the picture for mom-and-pop operations on the Internet is "dismal".

"Offline, small and medium-sized retailers have a 50 percent share of retail revenues," she says. "In contrast, they are barely capturing 9 percent of Web sales today. The picture is only going to get worse as the 'Wal-Marting' of America continues."

Despite all the chest-thumping and the built-in advantages corporations seem to have in their corner, there are those who still think they are marked for extinction.

Toby Corey, president of Internet systems integrator USWeb/CKS, is one of the more outspoken critics of major corporations and their slowness to adopt Web technologies. He firmly believes half the companies currently on the Fortune 500 list won't be there in five to 10 years.

"The Fortune 500 has gotten the wake-up call, and they're paying attention now," Corey says. "The problem is, many of these corporations are still fat, dumb and happy."

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