TechnologyInsight: E-business – Waiting for the upturn.

Insight: E-business - Waiting for the upturn.

Despite recent dotcom disasters and attacks in the US the picture for IT investment is not all bad. Experts remain confident of a resurgence in e-business. Alex Miller looks at why the UK's new economy is looking considerably more buoyant than Europe's

Despite the traumatic collapse of many dotcoms, financial businesses in the UK and throughout Europe remain unshaken in their commitment to e-business and have been adopting a more pragmatic approach to the new economy.

Research among finance industry IT, sales and marketing and finance directors in France, Germany, Italy and UK during June and July 2001, reveals just 3% of UK directors feel any lack of enthusiasm for e-business resulting from the dotbombs compared to 12% throughout Europe as a whole.

And, despite the recent terrorist attacks in New York and Washington, an IT resurgence is still imminent, despite consumer confidence having been shaken, with a likely recovery due early to mid next year.

John Gantz, chief research officer at IDC, agrees. He says: ‘US businesses may be losing up to #172bn in revenues as a result of disruptions tied to the attack. But personal consumption accounts for two thirds of GDP and is more important to the economic outlook than physical damage. We assume consumer confidence will fall.’

Gantz explains that IDC’s former ‘worst case’ scenario for economic recovery has become its ‘best case’ scenario.

The scenario is modelled on the effect of Desert Storm in 1991, when the economy declined for two years and IT revenue growth hit a 10-year low of 4%.

‘Why is our scenario not worse? Primarily because IT services account for so much of IT spending. This is not easily postponed or shut off, in spite of severe business disruption. Computers still need to be maintained, current projects completed, networks maintained, and so on,’ Gantz adds.

Prior to the attacks, IDC predicted that the IT recovery would begin in the fourth quarter of this year. Now it believes it will be postponed for a quarter or two. Indeed it is believed IT budgets next year will be higher than this year, though spending against these will be postponed until businesses sense the economy is turning around.

However companies can’t put off projects or upgrades forever, and the interest rate cuts made over the last year will start to take hold – with the IT industry historically leading the way out of recessions or slowdowns.

According to Intel e-business research, only 24% of European directors in the finance industry cite lack of money as a constraint. So, with morale intact and sufficient budgets, the European finance industry considers a number of other issues as their most challenging e-issues.

Company culture features high on the list of important issues for e-business, with 39% of UK and 49% of European finance companies considering culture change to be the most significant challenge of all. The impact of this necessary change in culture is reflected in both companies’ external and internal communications patterns. Many British finance businesses have already seen improvements in supply chain improvements resulting from e-business.

According to the research, some 71% are experiencing better relationships with their customers and suppliers compared to 68% in the financial sector across Europe.

‘Companies can no longer take business decisions in relative isolation. Integration and interoperability are crucial for the e-economy to work and this has potentially huge implications on a company’s culture,’ said Ian Wilson, director, e-business in EMEA.

This is a fact acknowledged by UK directors with a rising number undertaking more joint-decision making with suppliers and customers.

E-business could also be said to have improved how employees communicate within the boundaries of their company. Within the financial sector, over half of European and UK companies believe it has increased cross-departmental collaboration.

A point arising from wider research is the ever more common view that the IT departments are not driving the e-business revolution as much as first thought.

Instead, sales and marketing are playing an increasingly important role in the progression of a company technology and are having the greatest influence over e-business strategy.

Also, the need to have multi-skilled employees is essential. The role of the IT specialist has changed and the European finance industry no longer considers it to be as influential to e-business strategy.

Many European and British finance businesses believe multi-skilled employees will be increasingly necessary in the future. However, as a nation we appear to be the least willing to invest in acquiring these new skills.

‘All too often the impact of technology on people is ignored,’ says Wilson.

‘Research shows patterns of change in corporate culture in the UK and across Europe.

‘The importance of this shift should not be underplayed – the wrong culture will pose a serious barrier to the adoption of new skills, working patterns and technologies necessary for the ongoing success of the new economy.’

According to Gartner Group, spending on IT is set to double in the next six years, as businesses devote 7% of their spending to e-business and networking projects.

However, Sun, Compaq and the other vendors have reported slackening demand for their products. The contradiction between the various views of the market may be less significant than they appear.

Gartner’s doubling in IT spend is a long-term forecast, while the woes of manufacturers are temporary setbacks – or so we hope.

There is no question that the slowdown is having a negative effect on IT spending. Even so, the requirement for e-business systems does not change with the weather.

Sensible organisations will continue to invest in e-business for the sake of wider cost savings and efficiencies, improved competitiveness and all the other usual reasons.

IT investment may be curtailed in other areas – and quite right, too.

They can wait.

The million-dollar question is whether senior management has really bought into the e-business proposition.

– Gartner’s website can be found at

– Fraudulent finances blamed for dotbomb


Teenage online spending across seven European countries and the US will soar to #7bn by 2005 from #320m in 2000. And, according to research released by Datamonitor, teenage payment systems, such as prepaid plastic cards, will become increasingly commonplace.

If this is the case, payment providers should take responsibility to encourage money-management skills among young consumers.

Julie Cunningham, financial services analyst at Datamonitor, said: ‘In giving teens a card of any sort they are familiarising them with plastic.

But it does not necessarily follow that they are encouraging a debt-ridden society.’ Cunningham added that there is a need in the market for a teen payment product that allows secure payments online. ‘Teens want to have their independence and shop online,’ she explained.

The report also found that both traditional players and new entrants will have a part to play in the new market.

New entrants can attract teens through the ‘cool factor’ while traditional players should use their established role as a way to convince parents and gain their support.

It added that, while US teenagers in general have much more money at their disposal than their European counterparts, Europe will see more independent payment systems emerging from independent companies such as Smartcreds and Splash Plastic, as well as banks.

Meanwhile, according to IDC, around 60% of the European population will be using the internet by 2004, some 233 million.

‘The dotcom shakeout has done nothing for the reputation of the internet and e-business as a whole; however, it has allowed consumers and companies to develop more realistic expectations of what can be accomplished using the internet,’ said Daniel O’Boyle Kelly, IDC’s program manager for European Internet economy research.

– More on IDC is at

– Datamonitor’s website is at

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