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Net Prophet - by Dylan Tweney

January 5, 1998

New Year trends in I-commerce: legacy integration, SET, and EDI to grow

Internet commerce got hot in 1997. It's a safe bet that it will get even hotter in 1998. With an ever-increasing number of people getting on the Web (between 40 million and 60 million at last count), and with corporations looking for ways to conduct their businesses more efficiently, cheaply, and quickly, the amount of commerce happening on the Internet can only increase.

But along with the general growth in online commerce, there are some specific trends to watch for this year.

Business-to-business I-commerce growth will outstrip consumer I-commerce. In 1997, consumer-oriented commerce got most of the press -- but it was in business-to-business commerce where the real action was happening. Expect that trend to continue in 1998.

It's easier for an IT manager to demonstrate return on investment for a business-to-business extranet than for a consumer I-commerce site, because extranets can produce quantifiable savings.

Your company's trading partners aren't going anywhere, and they'll generally welcome any technology that makes it easier for them to deal with your company. If your extranet solution is implemented correctly, it will significantly cut the cost of doing business with these partners.

On the other hand, the consumer market on the Internet is still largely fragmented and uncertain. To be sure, there's money to be made selling products and services to consumers on the Internet -- but there's also greater risk in these ventures.

SET will spread -- but slowly. The Secure Electronic Transaction (SET) standard finally was approved in 1997, and the first SET-based products appeared last fall. That makes it possible for merchants to implement SET-compatible sites for the first time, and many pilot programs already are underway. To foster the spread of SET, credit card companies, such as Visa and Mastercard, will offer lower rates to those merchants who use SET.

But SET will grow slowly, because there's already an effective, convenient standard in place for consumer Internet transactions: Secure Sockets Layer (SSL). This is the solution favored by most online merchants because it's easy to implement, it is already built into most Web servers browsers, and consumers are getting quite comfortable giving out their credit card numbers on a secure connection.

SET, however, requires merchants to install new, SET-compatible transaction processing software, and consumers need to install "wallet" software on their PCs, an inconvenience that will slow acceptance of the standard.

I-commerce solutions will be increasingly integrated into legacy systems. In 1997, many companies put up their first I-commerce sites, often by adding a rudimentary catalog and order form to their existing Web sites. These seat-of-the-pants I-commerce solutions are expedient, but they're not very effective in the long term, and they often end up creating more work than they save.

This year, many of these sites will be updated to the next generation. An I-commerce site needs to be linked into a company's back-end data systems, so that it can provide customers with real-time information about product inventories, shipping status, and account status. A well-integrated I-commerce system provides customers with valuable services they can't get anywhere but on the Web, and at the same time it helps the merchant to streamline their business processes.

A few community-oriented commerce sites will succeed, but most will fail. Creating a community around your company and products is a great idea, and it's an effective way to build brand awareness, loyalty, and market share. But communities are difficult to establish and maintain. If you want to benefit from communities of interest, your company needs to make a serious commitment to taking care of them. That means dedicating staff to answering questions and fostering discussion, for example. It means responding to customer feedback. In short, it's a serious time-and-money commitment, and if you don't make it -- as many companies will not -- your would-be communities will shrivel on the vine.

EDI will get a boost from the Internet. Far from being replaced or eliminated by Internet-based commerce, electronic data interchange (EDI) -- the 20-year-old electronic-commerce standard used by many government, manufacturing, and retail corporations -- will become more widespread than ever. EDI solutions used to be expensive and time-consuming to implement, reliant as they were on proprietary Value Added Networks (VANs), expensive EDI system integrators, and complicated standards. That kept smaller companies from playing the EDI game, unless they were subsidized by their bigger trading partners.

But now even mom-and-pop shops can do EDI business, by using inexpensive Web-to-EDI translation services and by using the Internet as a transport, instead of costly VANs. Besides, the big companies that already have implemented EDI solutions aren't going to just throw away years of investment -- instead, they'll be looking for ways to make that investment pay even greater dividends. EDI via the Internet is one way to do that.

What I-commerce trends do you see in 1998? Tell me what your crystal ball is showing you.

Dylan Tweney edits InfoWorld's Focus on I-Commerce section.
Write to him at dylan@infoworld.com.

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