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Net Prophet - by Dylan Tweney

April 20, 1998

I-commerce will trigger massive market changes


What's revolutionary about Internet commerce isn't that you can buy books, plane tickets, and even groceries through your Web browser -- that's just part of the story. What's going on behind the scenes when a customer clicks on the "order" button on a Web page is much more significant -- and it's what will have the most lasting effects on your business, your industry, and the global economy.

Or, to put it another way: Internet commerce isn't just about wiring consumers. It's about wiring whole areas of life that have been up to now mostly untouched by automation.

As an example, consider Instill Corp., a Palo Alto, Calif. provider of I-commerce functions to the food service industry (at http://www.instill.com).

Food service, according to Instill president and founder Mack Tilling, accounts for 4 percent of the U.S. gross domestic product -- and yet it's an industry that has been in many aspects unaffected by the computer revolution. In particular, transactions between food service retailers (such as restaurants) and their suppliers -- food service distributors -- are still conducted primarily by phone and fax. If someone makes a mistake -- for example, shipping a crate of black olives instead of green ones -- it costs the distributor $35 to correct it. For a business with paper-thin margins, that's a painful cost to bear.

Mack hopes to change that with his company's product, e-store. Food service distributors use e-store to offer a simple Web interface to their customers. Instead of phoning in a big food order every night, restaurant operators can order what they need from the distributor using a Web browser. Simplicity is essential, since the operators are generally restaurant managers or chefs, not computer experts.

Electronically placed orders are not only less error-prone than phone or fax orders, but they are cheaper for distributors to process, since they're tied directly into the distributors' order-management systems. The Instill system will also cut down on the time restaurant operators spend ordering food -- which distributors can use as a selling point for their services.

Once it reaches a critical mass of customers, this service will put Instill in the enviable position of being the IT enabler for an entire industry. As its network of distributors and retailers grows, Instill will collect a massive amount of information on the food service supply chain. Instill can then sell access to this data mine -- for instance, to restaurant chains who want to track their purchasing habits.

Getting out of the back office

Instill's business model illustrates how Internet commerce has the potential to transform whole industries.

For the last 30 years, information technology in the enterprise has had its biggest impact on the "back office" -- the accounting, inventory management, and other data-intensive operations that enable a company to do its work efficiently and competitively. For the most part, IT has so far been focused on companies' internal business operations.

No more. Instill gives a glimpse of how the Internet, with its open standards and cheap, easily obtainable servers and clients, makes possible an unprecedented level of internetworking among all facets of business operations, internal and external.

Wiring the consumer enables companies to collect and track vast amounts of highly specific information about customer behavior and desires. Wiring trading partners, large and small, lets companies manage distribution channels more efficiently, reducing inventory towards the vanishing point. And wiring suppliers makes it possible to order the raw materials and operational supplies more effectively and cheaply.

The upshot is that within a few years, companies will have available to them vastly more information about their businesses and markets than ever before. Conversely, vast amounts of information will also be available to their customers and partners. This information will propel both buyers and sellers into new relationships and behaviors, and it will fundamentally transform many industries, displacing jobs and people even as it creates new opportunities.

Those companies that can mine this business information -- which is the really valuable ore of I-commerce -- will be the ones that will profit the most from the coming transformations.

Are you ready to wire your world? Write to me at dylan@infoworld.com.


Dylan Tweney edits InfoWorld's intranet and I-commerce reviews section, online and in print.


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