The Economist: Internet Ieads to transformation of established firms
Key points:
• The Internet offers huge scope for cost cutting
• The net doesn´t offer huge first-mover advantages; established firms can catch up quickly
• The Internet is bringing intensified competition
• The biggest beneficiary will be the consumer
The greatest impact of the Internet seems to be found in old firms, not new ones, says “The Economist”.
The spectacular bursting of the Internet bubble has led some to question the very importance of the net. Eighteen months ago, it was said that this was the greatest change since the Industrial Revolution two centuries ago, and thus that it would have a greater effect on productivity and management than did electricity and the telephone in the first quarter of the 20th century. Executives queued up to attend e-business conferences in order to learn how to bring the magic of the web to their companies, and speakers vied to produce the best soundbites. " E-business or out of business" was one of the favourites. And now? " Delete or, insert and" would seem the right adjustment to that slogan.
Yet there are also some common threads that can be picked out from the experience of these companies. The most immediately important-and relevant, in these increasingly stringent economic times-is the huge scope for cost cutting that the Internet offers. GE now does more business on its own private online marketplace than do all the public B2B exchanges put together. Siemens hopes to cut its annual costs in the medium term by 3-5%. The room for more is evident. One estimate suggests that, for routine office purchases, e-procurement costs only a tenth as much per order as does physical procurement. Low-cost airlines such as Ryanair have chopped their costs hugely by using the Internet to cut out travel agents and dispense with ticketing