Net Generation Business: An IBM analysis

Faced with a whole new ball-game, IBM has come up with some definations to help itself meet the varied needs of the up-and-coming market.What is Net Generation?
Written by Sq , Contributor
Faced with a whole new ball-game, IBM has come up with some definations to help itself meet the varied needs of the up-and-coming market.

What is Net Generation?

  • Net Generation companies are young, fast-moving firms that base their business on the Internet.
  • A typical Net Generation firms spends ten times more than the typical small business on information technology.
  • Last year, 15,000 or so Net Generation firms spent US$18.4 billion, which is expected to rise to US$63.4 billion by the year 2003.

    Net Generation market segments:

    Access ISPs

    Wholesale ISPs

    • Basic access

    • Search and navigation

    • Advanced media

    • Subscriber focused

    • IP backbone providers

    • Wholesale bandwidth


    Telco NSPs

    • Search and navigation

    • Personalization

    • 1:1 marketing

    • PSTN

    • IP backbone providers

    • VoIP

    Web Hosters

    • Shared hosting

    • Dedicated hosting

    • Co-location

    Rapidly emerging segments


    Born on the Web

    • Pure play ASPs

    • ISVs & SIs

    • WSP

    • Application leasing

    • Exchanges

    • Auctions

    • Marketplaces

    Net Access Definations

    Access ISP
    Provide end-customer access to the Internet. For consumers, this is primarily dial-up, with emerging high-speed access delivered via DSL (Telcos) or cable modems (cable companies). For businesses, this is primarily via leased line connections.

    Telco ISP
    Subsidiary or division of telecommunications companies that provide Internet-based services to their customers (access, hosting, messaging, commerce, local/regional portals).

    Web Hoster
    Provides and manages the web sites for end customers' web presence. These services are typically delivered in three models:

    • Shared services - multiple customers' web sites residing in a single server(s). Servers owned by the hoster, and customer pays for the service.
    • Dedicated services - single customer web site residing on a single server(s). Servers owned by the hoster, and customer pays for the service.
    • Co-location - dedicated servers, owned by the end customer, but managed and operated by the co-location company. Customer owns the server, and pays the co-location company for the operating environment, management services and network bandwidth.

    Note: IBM defines commerce hosting providers as ASPs. (see below)

    Provides navigational tools and content/access to content on the Web. Because of their access to 'eyeballs', portals have been able to generate significant revenue from advertising. Differentiated from Industry.com by their broad audience focus (consumers, business users - horizontal).

    Wholesale ISP
    Provides services to another segment of the NetGen industry. Today these are primarily backbone network services, but there are emerging wholesale offerings for value-added services such as hosting.

    This emerging segment provides hosted applications that are managed by the ASP and delievered via contract on a monthly fee, subscription, or rental basis to the end customer, primarily businesses. This includes commerce hosting providers.

    ASP business models include:

    • Managed applications - ASP provides end-to-end support for an application for the end customer. Typically a custom contract for each customer.
    • Application "rental" (aka Apps on Tap) - Customer rents a standard application on a month-to-month basis. The service is offered as is with low/no customization.
    • Business service - ASP that delivers a business service (i.e. expense reporting service) which includes full customer support for the service.
    • Business process - ASP that delivers an integrated set of applications that support key end-to-end business processes for an end customer. The service is offered as is with low/no customization.

    The ASP is distinguished by providing a hosted application service to the end customer. Software companies that develop a hostable application would only be an ASP if they build, deploy, and support the end customer using one of the above business models (these are called ISVs for the ASP segment).

    These companies build their business models with the Internet as their primary infrastructure to support most business processes: marcom, order entry, fulfillment logistics, customer support, etc. These are companies that are 'born on the web' (start-up), or 'born in the board room' (spin-off). The spin-off defined has seperate management structure and financials. They tend to have a business mission more narrowly focused (than portals) along industry lines or buying groups.

    These are distinguished from established enterprises who take their brand to the web as an alternative channel. These would not be industry.coms they are enterprises exploiting e-business.

    IBM is committed to the NetGen marketplace
    IBM has set up a US$500 million fund, to be delivered through venture capitalists, to assist NetGen companies to grow their IT infrastructure. Last year, IBM signed outsourcing contracts with more than 1,000 Internet and Application Service Providers and more than 650 Web integrators.

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