The E-volution of E-commerce Part II:
E-commerce Defined

One area in particular of seemingly exponential Net growth and change, is that spurred by business and its venture into the newest frontier, the cumulative efforts better known as “e-commerce.” E-commerce has gone far beyond facilitating credit card payments on-line in recent months and is the cause of both euphoria and ebullition amongst decision-makers in both the public and private sectors.

E-commerce has come to mean many things to many people. At its most basic level, e-commerce is electronic business, the transaction of commercial relationships electronically. Such a definition gives broad scope to a multitude of technological advances which are unfolding in the business world today. These range from back-office tools, such as enterprise resource management systems used to increase efficiency, streamline processes and minimize the need for human operation and maintenance; to front-office Internet-based applications which allow customers to make purchases and inquiries via desk-top computers, whether at home or work.

Formal definitions vary greatly. Leading network vendor, Nortel Networks, in its discussion of the subject on its corporate web-site defines e-commerce as simply “any transaction that occurs over two computer systems.” The U.S. Government Working Group on Electronic Commerce in its report last year adds that e-commerce is “the ability to carry out transactions over the Internet.” The Internet Tax Freedom Act defines e-commerce as “any transaction conducted over the Internet or through Internet access, comprising the sale, lease, license, offer, or delivery of property, goods, services, or information, whether or not for consideration, and includes the provision of Internet access.” And the Commerce Department expands the realm of e-commerce once again when discussing e-commerce sales, which it defines as “sales of goods and services over the Internet, an Extranet, Electronic Data Interchange (EDI), or other online system. Payment may or may not be made online.”

Extending from the Commerce Department’s definition, some argue that the e-commerce revolution actually began many years before the advent of the Internet with the use of private networks using technology called electronic data interchange (EDI) which allows partner companies to electronically exchange information such as purchase orders and invoices. Proprietary applications combined with private dial-up lines have also long served to allow companies such as Lexis-Nexus and Dialog to provide research and databases to its customers.

Eventually e-commerce matured as organizations and individuals alike came to realize that the Internet replaces the need for costly private phone lines with the inexpensive cost of a local call to the public network and the World Wide Web

Regardless of how they are defined, e-commerce initiatives and applications have altered the commercial landscape, and changed the way we conduct our lives. The recent slew of international e-commerce accords are demonstrative of weight of this digital revolution. The new and emerging means of electronic interchange are not only invigorating economies, hence requiring international agreements, but are also enhancing productivity, streamlining distribution, and revamping corporate structures, so much so that corporate IT annual budgets have broken into the hundreds of millions; Citicorp taking the lead with a $1 billion annual technology budget. As a result of the e-commerce inspired changes, companies are experiencing reduced inventory loads, lower cycle times, more efficient and effective customer service, lower sales and marketing costs, and new sales opportunities.

And even though practically everyone can benefit from the Internet, it is largely agreed by industry watchers that business is in the best position to reap the benefits. The Internet is without a doubt revolutionizing the way business has been traditionally practiced, radically altering corporate behavior, strategy, and structure. And as a result, the bottom is falling out of the bottom line, causing many to question traditional measures of worth and prospective profitability.

The results of a recent study of CFOs conducted by Duke University demonstrates the impact that the Internet is having on business. Based on their findings it is estimated that 56% of U.S. companies will sell their products over the Internet by 2000, representing an increase of more than 100% over two years from the 1998 estimate of 24%.

The Commerce Department credits IT with half or more of the acceleration in U.S. productivity growth rates, which rose from 1.4% annually from 1973 to 1995 to 2.8% since 1995. As a result, IT has played both a direct and significant indirect role in lowering inflation during the current economic expansion. Giga Information Group predicts that U.S. companies using Internet-based technology to improve business processes will likely save over $600 billion annually by 2002.

Part III: Shaking Down Brick-and-Mortar

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