A Clue..to Internet Commerce

by Dana Blankenhorn

For the Week of May 26, 1997

Volume 1, No. XIII

This Week's Clue: MRO

MRO stands for Maintanence, Repair and Operating supplies, the kinds of things factories use and buy regularly. This is the business Nets Inc. was going after until it went Chapter 11 about a week ago.

So what happens to that business now? It goes into overdrive! This is one area where current Web technology can produce big savings, where buyers and sellers alike have ample incentive to capture those savings, and where bandwidth is not an issue. Already, Fisher Technology's Procure.Net and W.W. Grainger's Grainger.Com -- distributor-owned sites which can handle Electronic Data Interchange (EDI) -- are doing big business. This means even suppliers or buyers who only have fax machines now have access to secure invoicing, and Web transactions. Thomas Register and GEIS are into this business together as TPN Register, and Cahners is into it as Manufacturing.Net. (Penton will soon enter as well , hoping to build manufacturing "communities" around its trade magazines.)

GEIS, which runs the largest EDI network, has all sorts of irons in this fire. In addition to its deal with Thomas Register for a commerce site, it's got a joint-venture with Netscape called Actra aimed at creating "CrossCommerce" software, for which it will be system integrator. Time will tell whether GEIS' wheeling-dealing gives it the same dominant position in the new world it has in EDI. The call here is they'll need lots of human capital to make it work -- even Netscape's had to back-off Navio, selling it to Oracle, in order to concentrate on its battle with Microsoft. (A Clue -- you can't do everything.)

The point is there are lots of ways to play this game, all of them profitable from savings buyers and sellers are motivated to capture, in a business estimated to be worth $60-300 billion, depending on how you count it and who you believe. If you can automate a company's requisition process so employees don't go to Office Depot and pay retail -- you also capture the savings from volume-buying. Ariba Technologies calls its solution Operating Resource Management, and has just signed-up a clued-in customer for its solution -- Cisco Systems.

A Clue. The game here has just begun. You don't need to reinvent the wheel. The Web means solutions are no longer one-off, but replicable. Whether you're automating a distributor's catalog , repurposing software to automate a supplier's catalog, or just trying to put these things together into an information marketplace , it's not sexy but it's big business. With big profits.

SSP (Shameless Self-Promotion)

Oh, yeah. We're hot. At least according to USA Today , which cited us for the weekend of May 16-18. (That notice ran in the paper May 20, Page D6, under the headline "On Board Atlantis And Get A Clue.")

But it's journalism -- checking the news, calling people, listening carefully, writing on deadline -- which keeps us hot, although I also handle consulting and commercial writing (ask about those rates via e-mail). If you're looking for excellent work -- like that found in my column at Atlanta Computer Currents or my regular work for Net Marketing magazine, don't wait for the e-mail -- give me a call at 404-373-7634.

Have We Hit Bottom Yet?

Our first clue, on March 10, was headlined "Surviving the Internet Recession." Now that most analysts admit we're in one -- or at least a pronounced "shake-out," which feels to its victims just like a recession -- it's time for us to talk about when we might come out of it. (Forget the successful Amazon.Com Initial Public Offering (IPO) -- the stock broke under its offering price within a week.)

The big problem is the infrastructure. You can't get bandwidth. Solutions are at hand, but they'll take time to work their way to the mass-market. Until then, you can't put bandwidth-intensive applications (VRML, streaming video, fancy Javascripts) on your pages and get the volumes you need to make the business plan work. So you can't create new niches, which means a shake-out in old niches, financial trouble for tool-makers, and unemployment for just about everyone.

To find the solutions, consider the poor packet. It first has to find a local phone switch, then the switch near your Internet Service Provide (ISP). From there it goes to the ISP, where it enters a router, then another, then (maybe) yet-another before it enters a backbone network. The backbone has to pass through a Network Access Point (NAPs are a major bottleneck), maybe two, before the process reverses. At each step a router plays Disgruntled Postal Worker -- opening the packet, checking the destination, and sending it along. As a result, as many as 5% of our subscribers don't get A Clue when we first send it -- the address is dropped, or a connection times out. What's bad for e-mail is worse for Web animations.

PSINet brags that its packets don't go into an "ATM cloud," where routers rule, and badly. Instead, PSINet uses a Frame Relay scheme, with Cascade equipment, which assures packets are opened just twice on its network -- when they enter and when they leave. That, or something like it, is part of the solution. The problems can be dealt with by increasing the number of NAPs, or upgrading the hardware and software used by major ISPs. The financial incentives are there, the business plans can work. Best of all, all the major players are meeting to get on the same page . But it will take time.

The second half of the problem is more local, more troubling, and more political. The solution is "IP Dialtone," taking Internet calls off the local telephone network before they hit a switch, identifying them and sending them straight to a data network. In the U.S., local phone companies are fighting to prevent this, knowing it would take them out of fast-growing markets, until they have a chance to build-out their own ISP businesses and (hopefully) dominate it. Allowing this slows the Web to Bell-head time. Preventing it is both a technical and political struggle . But by finalizing a technical solution and introducing it through a *major* ISP (are you listening, AT&T?) the struggle can be initiated. Once the struggle begins, we can start heading-up again.

Meanwhile, deep pockets rule. The Internet.Com domain was picked up by Mecklermedia when its owner went-under recently. Expect lots more mergers like that between Netscape's Navio and Oracle's NC unit over the next month. Watch smart, undercapitalized outfits like SiteSpecific get snapped-up faster than you can say "Attention K-Mart shoppers." . Watch idiots predict the death of Internet competition, its dominance by players like Microsoft, Time-Warner and News Corp. Watch events seem to bear them out. But rumors of competition's death are greatly exaggerated -- we're just waiting on a a bigger fish tank in which to hide.

A Clue -- watch what happens to networking stocks, watch what happens in the ISP market, look closely at anything which bypasses local phone networks or promises a mass-market of great speed. Until you see something ordinary users can sink their teeth into, hunker down, find underserved niches, and keep your powder dry. You may have to sell-out today's technology in order to work on tomorrow's. Don't worry about it. Your time will come. Just not now.

Clued-in, Clueless

Clued-in is Aardvark , iron-clad proof you don't have to be near the center of the action (i.e. Silicon Valley) to cover the Web well. Aardvark's in New Zealand, and covers the Web very well indeed. Daily. They add their own stories to a feed which includes major links to U.S. Web-news sites. They include search boxes linked to all their U.S. competitors. Their design is light on graphics, which means it loads fast. Click-over and learn.... .

Clueless this week is the Clinton Administration , which was warned for years that its stand against export of encryption technology would cost the U.S. this key market, and which now seems to have waited too-long to get with it. In recent weeks Sun Microsystems has added a Moscow company, Elvis+ , to supporters of its SKIP stateless encryption protocol, which gets around the restrictions against exporting strong encryption. A Swedish company called Medcom has also joined the rush, with encryption strings as long as 2,048 bits long. Zona Research thinks the U.S. can still get ahead of this train through international negotiations, but that's not clueless -- just wishful thinking.

A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list. Like Netscape Navigator, it carries a list price -- $49 per year. Subscribers can receive either a .txt file or an .htm file. The .htm version features links which become active when online with a browser, or an e-mail package like Netscape 3.0. (Let us know which you prefer.) To take your name off the list, simply write REMOVE as the subject, or content, of a message replying to this post. To request your free copy, write us at Dana Blankenhorn@worldnet.att.net. We're on the Web at www.tbass.com/clue and www.ppn.org/clue .

A Clue...to Internet Commerce -- Copyright @Have Modem, Will Travel and Dana Blankenhorn, 1997