Stepping-out with the Internet

More than the card punch, the monitor or the transistor. Once someone had built an electric machine incorporating Von Newman's ideas of a stored program, data in, calculate and data out, then computing Part I was done and dusted. Sure, computers started to be connected together but always in a predetermined and highly limited manner.

The Internet has given us a quantum change as big as the arrival of the original computer. It has provided a vast over-arching global access to the whole of the connected world.

Government figures tell us that already 45 percent of the adult population has Internet access in this country, at work or at home. There are now 8 million homes with Internet access in the UK, a number which continues to grow.

The access that customers have to businesses, that businesses have to other businesses and - to a lesser extent -- that businesses have to customers is now unprecedented and genuinely global.

2001 will be the year when the Internet starts generating worthwhile profits for many companies. There is now a higher level of installed investment in Internet infrastructure than ever before. And this means a lot more than just hardware and software.

The key investment is in skills and corporate understanding. Businesses have experimented with the new technology and web sites and have looked at what the competition is doing. They have been through at least one development cycle and discovered the fact that Web applications are clunky, expensive and time consuming to deploy. And they can't get the staff with the right skills.

But this has always been the case with new technologies. As deployment tools and companies' processes improve and the marketeers start zeroing in on what the customer actually wants and will react to; then Internet-generated sales and profits will grow.

These were bandwagonists with other people's risk capital to burn; and good luck to them.

Their failure tells us nothing about the potential the Internet provides for generating profit which is fundamental and immense. The fact that so many dot.coms have crashed and the value of the Nasdaq is half the value is was 12 months ago is not a cause for concern, far from it.

Now the hype has evaporated, IT professionals can start using the Internet seriously to generate some bottom line. Now the Internet can be perceived by corporations for what it is -- a tool to gain and maintain competitive advantage -- and not a magic potion where any half-brained e-commerce strategy produces instant share price hikes from nowhere.

Company directors can now be given the space to ask questions -- regarded as quirky just a year ago -- like 'what is the return on investment?'.

As new Internet concepts become rarer, and companies copy ideas from competitors, a trend towards commoditisation of products and services will produce vicious on-line competition.

This means making productivity gains and passing them on to customers in lower costs. The access your customers will have to your competitor's product prices will be instant and seamless.

Those companies that deal in products that can be delivered over the Internet -- such as in the financial services sector -- will find this year that things will get tougher.

In on-line comparisons of commodity products such as insurance, mortgages and savings accounts, a fraction of a percent gained through productivity gains will put you ahead of your competitors.

This is all great news for companies that believe in and act by the rules of market forces. There will be less opportunity for so-called reputable companies to rip off customers. Practices such as banks quietly lowering the rates on particular savings accounts to virtually zero -- unbelievably still in practice today by household names -- should become a thing of the past.

Customers, be they end-users or business partners, don't take kindly to being taken advantage of and the Internet provides the ultimate means of finding an alternative supplier.

The downside of this commoditisation and increasing competition resulting in reduced margins, however, will be inevitable consolidation as mergers result in fewer players taking a larger share of commodity markets.

Business use of the Internet still has a long way to go, but the initial faltering and expensive steps have been made. Now is the time for upping the pace and striding out ahead of the competition.

The targets for 2001 for your company's Internet services should now be productivity, competitive advantage and profit.