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TECH TALK: Tech Trends: 6. e-Business

July 13th, 2004 · No Comments

The Internet has become a key ally in doing business, or what Paul Saffo has called, trading in a world of electrons. The Internet is impacting many industries not just the likes of books, music, recruitment and finance, but also more complex ones with deep back-ends like travel, real estate and telecom. The Economist wrote in a recent survey on e-Commerce: E-commerce is already very big, and it is going to get much bigger. But the actual value of transactions currently concluded online is dwarfed by the extraordinary influence the internet is exerting over purchases carried out in the offline world. That influence is becoming an integral part of e-commerce A company that neglects its website may be committing commercial suicide. A website is increasingly becoming the gateway to a company’s brand, products and serviceseven if the firm does not sell online. In India, too, we are seeing an increase in online commerce. The Indian Railways have been at the forefront of this through their online booking website. Jet Airways too has launched e-ticketing. The world of e-business is here in full force.

Back in the late 1990s when the Internet hype was at its peak, the belief was that the Internet would change everything. Every industry would be transformed. If something wasnt on the Internet, it didnt exist. Then, reality set in. While the impact of the Internet has not necessarily been earth-shattering, it hasnt been something to scoff at either. There are many businesses which the Internet has made a difference too. By reducing transaction costs, it has helped consumers get lower prices and forced producers to become more efficient. By bridging geographical barriers, it has allowed companies to open up new markets. Search engines like Google have allowed small businesses to reach out to potential customers far more cost-effectively than other media. Electronic marketplaces like eBay have seen many build businesses around them.

The Economist wrote how the Internet is becoming a key part of the search-find-obtain process for consumers:

What is going onis arbitrage between different sales channels, says Mohanbir Sawhney, professor of technology at the Kellogg School of Management in Chicago. For instance, someone might use the internet to research digital cameras, but visit a photographic shop for a hands-on demonstration. I’ll think about it, they will tell the sales assistant. Back home, they will use a search engine to find the lowest price and buy online. In this way, consumers are deconstructing the purchasing process, says Professor Sawhney. They are unbundling product information from the transaction itself.

One of the biggest commercial advantages of the internet is a lowering of transaction costs, which usually translates directly into lower prices for the consumer. So, if the lowest prices can be found on the internet and people like the service they get, why would they buy anywhere else?

One reason may be convenience; another, concern about fraud, which poses the biggest threat to online trade. But as long as the internet continues to deliver price and product information quickly, cheaply and securely, e-commerce will continue to grow. Increasingly, companies will have to assume that customers will know exactly where to look for the best buy. This market has the potential to become as perfect as it gets.

As with any new infrastructure technology, it takes time for its full potential to be realised. The Internet is now reaching the stage where it is becoming a utility for many aspects of business, especially in the developed markets. Increasing broadband availability will only accelerate the trend. As the ecosystem around the Internet gets put in place, we are moving closer to the future where e-business and e-commerce become synonymous with business and the commerce, and the e-prefix simply disappears.

Tomorrow: The Next Wave


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