Web may breathe new life into old business

As the Internet continues to shift from an entertainment to a transaction medium, it leaves the wreckage of long-standing business models in its wake.

A recent study by Deloitte Research predicts a new age of electronic price wars, the eventual disappearance of money, a solution to the software language barrier and a queue system for the “world wide wait” that is the Internet of today.

Business survival in this brave new world will require a lot of transformation, said David Roddy, Boston-based chief telecommunications economist at Deloitte Research and author of the study entitled The New Economics of Transactions – Evolution of Unique E-business Internet Market Spaces.

“In terms of stores, I suspect there is going to be more social orientation (to them). People are spending more time on the computer at home. So when they go out, they want to do social things. Because [the stores] can’t compete head on with (e-commerce) prices, they have to differentiate themselves a little bit more in other ways.”

According to the study, by 2002 Internet revenues will top US$1.1 trillion and more than 70 per cent of large companies will have adopted the Web as a sales medium, rendering the barriers of time and distance between buyers and sellers obsolete.

The emergence of digital cash is also a major factor influencing change, Roddy said. According to his study, there is a potential cost savings of 72 per cent over traditional transactions – worth an estimated US$18.3 annually.

“In the future, the idea of a bank is going to be much more like bunches of computer programmers, dealing with all kinds of modes of transactions where we may rely less and less on the traditional forms of cash and cheques,” he said.

Growing use of e-commerce and other Internet-based services such as multimedia distribution will soon turn into a “gridlock” if some form of traffic management is not soon implemented, he said. One solution suggested in the study is the development of a “priority pricing system” where consumers pay different prices for varying transport speeds, access and quality levels.

A standardized system for processing Internet financial transactions, based on XML, should also speed things up greatly, Roddy said. He anticipates that XML will replace HTML as the universal language of e-commerce on the Web.

The study also predicts that ISPs will soon be replaced with CSPs (commerce solution providers) as an increasing number of vendors move to supply complete end-to-end solutions for conducting electronic commerce.