IBM clicks on to e-business

IBM is betting its future on e-business.

Nothing extraordinary in that. Except that it is not the same as electronic commerce, says Internet technology vice-president John Patrick, a man who, along with chief executive Lou Gerstner, is credited with giving Big Blue a four-year head start on to the Internet.

"E-commerce is 'click here and buy something'. E-business is 'click here to start a supply chain'," Mr Patrick told journalists from Asia Pacific visiting IBM's research facilities in rural New York last week.

"It's click here to start a just-in-time inventory flow. Click here to allow a new employee to start the on-boarding process. Click here to allow six very small companies to come together in a virtual conference to create a bid to compete against a company much larger than any of their individual sizes.

"E-business is a superset of all transactions from all customers," he said.

While in New Zealand e-commerce or e-business still makes up less than 4 per cent of Internet use, the rate of adoption in the United States is far greater.

Television advertising, particularly in the major centres, is heavily weighted with dot.com ads, as virtual companies or companies going virtual try to capture mind share.

Coming to terms with the Internet did not happen overnight for IBM, a lumbering giant which spent the first half of the 1990s reflecting on lost opportunities and its humiliation by upstart Microsoft.

But while other companies were entranced by the browser wars, Mr Gerstner was telling his company to focus on the business implications of all this connectivity.

While companies like Amazon.com seemed to be establishing the Internet as a giant retail store, IBM was expecting business to business transactions to be up to 10 times greater than business to consumer.

Despite its size - it claims 70 per cent of the world's corporate data is managed by IBM software running on IBM servers - the company could have lost the plot, like technology giants before it.

Instead it adapted and thrived. Its share price rose 76 per cent last year and continues to rise. Revenue in 1998 was $US81.7 billion, and nearly half of the $US35.4 billion contribution came from new products.

Mr Patrick, also chairman of the Global Internet Project (www.gip.org) developing future Internet standards, said the Internet was still at its very beginning.

"The number of people connected to the Internet as a percentage of the world's population rounds off to zero," he said. But that connection was coming, and it was more likely to be through some peripheral device or appliance - what IBM calls pervasive computing - than through a PC.

As to whether the Internet could cope with the growing traffic, Mr Patrick said he believed technology such as digital subscriber line (DSL), wireless and the competition between telephone and cable companies meant the world will soon be awash with bandwidth.

"The Internet is about a massive transfer of power from institutions to people. People have a very strong say on what happens," he said.

Being on the Internet should now be a given for companies big or small.

"Whether they will be successful will be a function of segmenting their markets, establishing the correct processes and providing great customer service and support."

If businesses wanted to survive, they had to think outside-in, he said.

"Outside is where the people are. They're the ones who have the ability to click."

Think outside and work back into your core IT environment.

"If you start with the reengineering and say 'I'll use the Web later', later may be too late. Start simple. Don't have an 18-month plan, have an 18-day plan," Mr Patrick said.

While this may be an oversimplification, IBM has developed a framework for customers to build on. Everyone explains his/her role in terms of an e-business cycle which can start from any of the four key areas: building new applications; running a scalable, safe environment; leveraging knowledge and information; and transforming core business processes.

Mr Patrick said scalability was critical. Many large sites relied on hundreds of PC servers, but Mr Patrick said such sites were likely to migrate to large servers such as IBM's S/390.

He said the Internet had already profoundly changed the way people work together, and more was coming. He demonstrated sending a short message to a German colleague using the Lotus SameTime application, now available, combined with experimental simultaneous translation and text to voice software, enabling his typed words to be translated to German on the fly.

Such technology raised the possibility of a "real time interactive multilingual intercom", allowing questions asked in any language to be routed to the personal most qualified to answer.

Across IBM, the 290,000 employees were learning to think in terms of what the Internet meant to them.

Robert LeBlanc, the vice-president in charge of strategy for IBM's software solutions division, said IBM's vision was of a billion people connected to a million e-businesses through a trillion intelligent devices across the globe.

He said in the e-business application model, everything was connected. Instead of someone routinely filling up a soft drink vending machine once a week, the machine could be connected to an ERP (enterprise resource planning) system over the Internet to send a warning when it was nearing empty.

Integrating all these devices would require lots of messaging software - an area where IBM already had 65 per cent market share, Mr LeBlanc said.

Robert Zimmer, strategy director for the networking hardware division, said in the traditional applications model, the work was done on the client or the server.

In the network model, applications are spread across clients, server and networks.

He said sales of networking hardware showed how the Internet infrastructure was being rolled out. In Asia Pacific, sales of IBM's ethernet switches had increased 237 per cent and enterprise routers by 335 per cent. Sales of LAN (local area network) switches went up 87 per cent, ATM switches by 25 per cent and WAN (wide area network) access by 38 per cent.

* Adam Gifford visited IBM's New York research facilities as a guest of IBM.