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A Year Ago: E-firms redefine the competitive landscape

First published: Thu, 14 May 1998 14:12:48 GMT
Written by Eugene Lacey, Contributor

The big theme dominating this week's E-Commerce Forum in Monte Carlo was the way that electronic trade is going to redefine the competitive landscape for most industries. Speaker after speaker quoted examples of how Dell and Amazon are increasing market share by selling direct and marketing their products aggressively on the Internet.

But impressive as the Dell and Amazon case studies are, many attendees were surprised to learn that most e-commerce is business to business with business to the consumer not expected to boom in the short term, though none doubted that this would eventually happen.

The threat to firms that do not have an e-commerce strategy is that they risk having all, or some, of their strongest competitive advantages circumnavigated by clued-up competitors who simply partner and outsource across the Internet to match or improve upon everything the traditional firm offers. When all the pieces of the virtual corporation are in place, all that remains is to build an attractive Web-based front door for customers to walk through. Cost savings can be so significant that even long term customers can be wooed away from trusted suppliers because of the up-front financial savings on offer. Hewlett Packard's Mark Garsteen, calls this process `disintermediation', and it is a buzz word gaining currency to describe the way in which a firm's basic value proposition can be brought into sharp focus by e-commerce.

It is this redefinition of the value proposition for industries and key players within them that is fuelling the explosion in e-commerce -- said to grow from $8bn (£4.9bn) in 1997 to $333bn (£204bn) in 2002 according to figures from conference organisers, IDC.

But not everyone in Monte Carlo was convinced. One analyst dismissed all the projections he had heard at the conference as "BS". Another delegate told me it was no surprise that these staggering projections are being made at a conference like this because the whole event is funded by firms selling e-commerce solutions. "It's just like the Klondike, where the real money was in shovels."

On a more positive note, many speakers were optimistic that the thorny problem of securing transactions across the Internet may be close to a solution. IBM and others, were pushing the SET (secure electronic transfer) system as a standard e-commerce traders should adopt. IBM now says it has over one hundred customers using SET throughout Europe. According to Shikhar Gosht of e-payment specialists, `Open-Market' SET is "a standard developed by MasterCard and VISA with additional partners including IBM. It has the following features: data integrity is guaranteed by a digital signature -- by that we follow the new law of digital signature just signed off by the European Parliament...confidentiality is guaranteed by an encryption mechanism".

A less well reported problem for globally trading e-commerce firms is dealing with the tax and regulation regimes of different countries. While it is hoped these problems will be eased in Europe by the euro, and EMU, many thorny problems remain. One firm offering an electronic solution to many of these problems is CyberSource -- a start-up funded by Microsoft billionaire, Paul Allen. Executive Vice President of CyberSource, Tony Bates told the E-Commerce Forum that the emerging principle supported regulation at the country of origin, as may taxation, with some territories, such as the state of Texas for example, favouring a "bit tax" on e-commerce firms.

The highlight of the conference was a keynote by professor Jeff Rayport of the Harvard Business School, who provided new examples of successful e-commerce firms, in particular the fast-emerging auto sales Web sites in the US. But Rayport's main praise was reserved for the UK's leading telephone bank, First Direct. According to the professor, many of First Direct's customers are so happy with this particular example of electronic commerce that they phone the bank on Christmas day to wish the operators seasons greetings. "First Direct has a 96% customer retention level...they basically only lose customers when they leave the country or die...that is the level of customer loyalty it is possible to build with a successful e-commerce business."

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