ECW10
Office Futures
ECW10
Issue 10, March 13, 2000
+++ Is Europe getting the idea?
+++ Smart shops need smart communities
+++ E-commerce and the euro
+++ Events news
+++ About eComWatch
+++ Is Europe getting the idea?
It looks as though this is the year that European companies 'get' the Internet. Here are some straws in the wind: a dozen news items from British newspapers in January and February 2000, arranged in alphabetical order of company name.
- Abbey National, a building society converted into a bank, said it plans to spend GBP200 million by the end of the year in order to get 1 million customers for its new online bank and for its banking and shopping portal, cahoot. Neither was operational at the time of the announcement. The Abbey's share price rose 6 per cent on the news.
- British Sky Broadcasting, Rupert Murdoch's satellite television company, announced that it would be spending GBP250 million over the next year and half to move on to the Internet and into mobile communications. Its share price rose 18.5 per cent on the news.
- ABN Amro Bank, in The Netherlands, said it would be spending the equivalent of GBP1.13 billion over the next three to five years in order to serve its 15 million customers on-line.
- Direct Line, the British telephone-based insurer, announced it is investing GBP50 million in a new Web site to sell new and used cars and spares.
- Halifax, another 'demutualized' former building society, announced a new Internet venture with Peter Wood, the founder of the Direct Line insurance company, which he had left a year previously. The operation, called Esure.com will not begin operating until 2001. The Halifax's share price rose by 22 per cent on the news.
- Lloyds TSB, the bank group, announced plans for a separate European online bank. It plans to spend between GBP200 million and GBP300 million on getting 1 million customers for it by 2003. Its shares fell by 12 per cent during the day but finished close to their previous level.
- Pearson, the media and publishing company, raised GBP250 million through a share placement, to finance the expansion of its Internet businesses over the next two years. These include the ft.com Web site. Its shares fell nearly 3 per cent on the news.
- Prudential, the insurance company, said that its online banking subsidiary, Egg, is not expected to break even until late 2001. Its 1999 loss of GBP150 million will probably be repeated in 2000. Egg has 800,000 customers, gained in 18 months, and has a stock market valuation of between GBP1.5 and GBP4.0 billion.
- Reed Elsevier, the Anglo-Dutch publishing group, announced a GBP750 million programme to move its main products online. There was a 10 per cent drop in its share price.
- Reuters, the information services group, announced an alliance with Equant, the American data network group. They are creating a GBP3.7 billion joint venture company that, by June 2000, will offer trading and electronic commerce services to the financial services sector. Reuters' share price rose 7.5 per cent on the news.
- United News & Media, the British publishing and broadcasting group, announced a GBP370 million Internet investment programme over two years. It also said it plans to float parts of the online business on the stock markets.
- Yorkshire Building Society, the country's fourth largest, announced that it would not be launching a separate online range of products but would begin selling its existing ones over the Internet. Its chief executive said, 'The fashion for Internet-based products will wane' (The Guardian, 18 February 2000). Being still a building society, the Yorkshire has no publicly-traded shares.
++ Initial responses
The thing that strikes one immediately about this spate of announcements is that these organizations seem eager to spend money, and in large quantities. (The grouping of these announcements possibly results from these decisions being held over until the Y2K dust had settled.) For the ten companies that quoted figures, the aggregate investment is more than GBP7 billion. The nine British companies alone are investing at least GBP6 billion. This is more than the total value of goods sold online in the UK in 1999, estimated at GBP5.3 billion by UK analysts, Net Profit.
Second, with the exception of ABN Amro, these organizations intend to spend the money over a short period. They must therefore be expecting a quick payback. In several cases, this is in the form of gaining customers. Profit is not being promised except by 'The Pru', and that only after at least two years of operation.
Another significant aspect of this list is that, with the exception of Equant, all the companies are European. With the same exception, they are also all in the business of selling an intangible product -- information -- that is well suited to online trading. Publishers, banks and insurers have always been in the vanguard of adopting new computer and communications technologies, and have been prepared to spend plenty of money in doing so.
Finally, the stock market response to each item of news appears unrelated to the industry the company is in or the size of the investment. Reed Elsevier commits itself to a large expenditure, and the market is unimpressed. Reuters makes an even larger commitment, over a much shorter time, and the market is pleased. The responses to the respective news from Lloyds TSB and from Halifax are similarly divergent.
++ Taking electronic commerce seriously
> these pieces of data we can infer that European business is now taking the Internet and electronic commerce seriously. Also, the investment required to be a serious participant appears to be large. This could be either because e-commerce is intrinsically expensive or these companies are trying to secure some territory before someone else does. The short periods over which these companies intend to make their investments makes the latter possibility more likely, but does not exclude the first.
The someone else they are trying to steal a march on is either their European competitors or those from America, or both. If it is the Americans, then these companies may be trying to hold back or forestall a transatlantic invasion of their home territories. Are they too late, one wonders?
Where these information-based industries are leading, others will follow. If our preceding suppositions are correct, the newspapers will soon be reported equivalently large investments by European retailers, wholesalers, distributors, manufacturers and other companies with tangible products.
If proof were required that e-commerce is being seen as important by large organizations, particularly by large European organizations, then these newspaper reports are the first instalment of it. These amounts, with the exception of Net Profit's figures, are real. Each represents a real commitment made by a real director of a real organization, and one who will be judged on the results. (This makes them more reliable than the often fantastical outputs of the market forecasting industry, whose members appear to enjoy, in Kipling's phrase, 'power without responsibility'.)
A final point: from these announcements it looks as though the stock markets and analysts are not impressed by size alone. A company's management performance and the identity of the people leading its e-commerce programme seem to mean more. The fundamentals still apply, and are beginning to reassert themselves.
-oOo-
+++ Smart shops need smart communities
I had an interesting journey this week to a francophone area of our province. I was meeting the partners of the Uniglocal consortium (http://www.uniglocal.com). This is a partnership of content providers and delivery systems folk, dealing with activities such as telemedicine and distance learning.
The consortium operates under the ideas and policies of the 'Inforoute' agency of La Francophonie (see http://www.francophonie.org/oif.cfm). In many ways this is the equivalent of the (British) Commonwealth, but probably has more intellectual and theoretical infrastructure in its Gallic little finger than the dear old Commonwealth has in its entire Anglo-Saxonly pragmatic body.
La Francophonie's vision is of how the new economy -- and particularly its infrastructure -- can be applied to assist its less developed member countries skip a technology generation and participate on a more level playing field in the global economy.
This message strikes a particular resonance in Canada, a country where vast distances render the delivery of a number of services difficult. These same conditions have tended to foster communities that have retained the values of neighbourliness, co-operation and interaction far longer than big cities in North America or Europe. After all, if your fire department is totally voluntary, you are likely to have a far closer knowledge of -- and interest in -- its equipment and Fire Hall than ratepayers in a borough of London do in their tax-funded fire station.
Canada, therefore, has put huge resources -- financial and human -- behind the development of Community Access Projects (CAPs). The first generation of these was simply public sector Internet cafes. A simple portal offered an interface to a number of government services and free e-mail accounts. Typical locations were libraries and schools.
The current generation of CAPs is more focused on special audiences. For example, our province and the federal government have just agreed to develop 6 CAPs in family resource centres [centres where social services and training in parenting skills are delivered in a fairly informal environment]. Similarly, several Legion Halls [the Royal Canadian Legion is an organisation for veterans and, latterly, their families] now boast CAPs and the Department of Veterans' Affairs has become a lead innovator in the development and delivery of services over the Internet.
Canada's government recognizes that particular groups, such as the poor, the unemployed and the elderly, are less likely to have access to the Web or the skills to use it. A key component of CAPs, therefore, is on the spot training to help users master the basic technologies and locate the services and resources they seek. Although the private sector sponsors of CAPs have also been keen on the interactive democracy potential of CAPs (virtual town halls, teledemocracy), government has shown far less enthusiasm for such possible applications.
Both the Canadian government and La Francophonie have shown considerable interest in the economic development potential of this model, and Uniglocal is actively considering pilot projects in Africa, with the enthusiastic support of several sub-Saharan governments. The Internet cafe is already a hugely popular phenomenon in much of the developing world and the whole issue of Web access is causing a large number of authoritarian governments many sleepless nights.
We who grew up with the American model of Web access are used to the idea of the resolutely individual and individualistic approach to Web access. All our consumer e-commerce thinking is directed to the 'one to one' model of the Web and the Web user. That model presupposes a user who has the financial resources and computer knowledge to have Internet access in his/her home.
During the early years of the Web, that model largely attracted an audience of young, nerdish males. That has expanded to encompass much of the middle class on two continents. It still largely excludes the older, less advantaged and most of the world outside North America, Europe and certain of the Asian 'Tiger' economies. For the rest of humankind, community access to the Web will be the norm, necessitating a rethink of the way in which Internet provision is planned and financed.
This in itself opens major commercial opportunities. I was invited to attend a planning meeting for the CAPs being designed for less advantaged families. The pilot, if successful, will be rolled out nation-wide. Central to the thinking is portals tuned to status and/or needs, such as a portal for young mothers. The organizers are seeking corporate sponsorship to help develop the project. Such initiatives potentially offer the Gerbers or Heinzes of the world the opportunity expand their reach to almost 100% qualified audiences.
Interestingly, this same thinking may work its way back into 'mainstream' e-commerce. (Good heavens, is it now really possible to use the phrase "mainstream e-commerce" in a meaningful way?) Most e-commerce operators have almost a Chinese Wall between their internet and bricks-and-mortar operations. Your local bank branch is far more likely to confront you with an ATM than a personal computer, despite the fact that a PC could deliver a far wider range of services. We still think of Web shopping and the High Street as totally different idioms, in a way that someone dependent on the High Street for his Internet access wouldn't.
We have argued previously that a key component of the maturing of e-commerce will be the change from Web sites that are catalogues online to sites that are basically shops online. Maybe another key component is the change from shops that are computer free to physical outlets that integrate the Web technologies into their aisles and waiting rooms.
Naturally, this needn't just be great hulking terminals with baleful screens. The Web's next evolutionary step will carry it onto a huge range of IP devices, from portable phones and PDAs to much more interesting devices. This offers huge potential for Point of Sale (POS) operations, especially if customer recognition were built in, as with the ubiquitous affinity card as a log-in. A customer in a shop could be as 'personally' treated as they are on a Web site -- much as that still sounds like a contradiction in terms.
[Boots is starting doing this already, points out Roger. The company, which is Britain's largest retail chemist (drug store) is using kiosks in some of its stores. Shoppers can use the computer terminals to obtain discount vouchers, usable in those stores. Holders of the Boots loyalty card also receive offers and vouchers tailored to their previous shopping patterns and expressed preferences. During a three-month trial of the scheme, sales in the stores with kiosks rose by 6% overall, with sales to loyalty card holders increasing by over 30%.]
The bookshop that was overtaken in 'bookshopness' by Amazon's site tricks could fight back with the benefits of the electronic wizardry and a real cup of coffee. Eventually a music shop will allow a buyer to create his own CD -- in exactly the same way he now can (illegally) with Napster.
The American e-commerce model largely foresees smart shoppers using the Web to more fully realise their potential as consumers. The Third World development model sees smart communities as a way to compete internationally. A marriage of the two could leads to a whole new world of POS service and experience, turning it into a sort of super-global Cheers: "Where everybody knows your name". [And sells it to everyone else? Roger]
-oOo-
+++ E-commerce and the euro
Organizations trading with any of the eleven European countries that adopted the euro are increasingly finding themselves part of that currency system. It comes up the supply chain. 86% of UK retailers have suppliers in the eurozone, and many of those suppliers are insisting on being paid in euros. It also impacts the customer chain. For instance, BMW has directed Rover to have its UK sub-contractors invoice in euro, and at the challenging exchange rate of DM2.7 to the pound.
This phenomenon, called euro seepage or eurocreep, is particularly apparent in electronic commerce. A survey in November last year polled the Chief Financial Officers (CFOs) of leading enterprises throughout the EU. More than 90% of those CFOs believe that the euro will have a positive impact on the spread of e-commerce throughout the Economic and Monetary Union (EMU) zone, as currency barriers are eliminated. Innovative UK enterprises are embracing the euro as an opportunity to spread their net for e-business.
Consider again those 86% of UK retailers with suppliers in the eurozone. Many of these suppliers have implemented or are implementing customer and supply-chain management, using the hugely cost and time-saving Internet. These suppliers are in countries that will have no legal tender but the euro within two years. This presents a simple decision to those UK retailers -- embrace the euro and the Internet together or be damned.
++ Media and public hostility
Yet, despite all this, the euro has come in for a bashing from the United Kingdom press ever since its launch at the beginning of last year. [One needs only to look at the nationalities and tax arrangements of those papers' proprietors to see why - Roger.] Some papers point to the fact that the euro has declined in value by some 15% in those twelve months. That weakening has proved a boon for the 10% of exports from 'The Eleven' that are destined for outside the 'eurozone'.
Most pundits agree that the fall in value is no more than taking up slack. This was created by the Deutschmark being over-valued by that amount when the rates of the eleven euro currencies were fixed.
Also, most of the British media don't seem to have noticed that the City of London has in effect joined the eurozone. The Financial Times of 12 January this year noted that borrowers raised $1,350 billion in the international bond markets in 1999, an increase of almost 50% over 1998. This record level of bond issuing is to fund mergers and acquisitions, themselves in most part spurred by the Economic and Monetary Union (EMU) and the euro. And of that record sum, 44.6% were issued in euros, against 42.5% in US dollars.
UK borrowers issued 6% of those euro-denominated bonds. The Bank of England estimates London's share of underwriting of the total euro-denominated issue at over 50%. Also, in the first 9 months of 1999, 38% of the total reported business of member firms of the Stock Exchange was in euro-denominated equities.
So the City is in, but survey after survey shows British support for the EMU and the euro in decline. The latest MORI poll shows that over 70% of respondents were opposed to the UK joining the single currency. No votes there, so no support from government. The Prime Minister has ruled out any action to 'bounce' the electorate into a snap referendum early in the next parliament.
++ Courses of action
Where does this confused public picture leave the UK business leader, trying to make strategic and tactical decisions on EMU? The Government's main consultancy group on the euro, the Business Advisory Group was reportedly last convened in October 1998, with no date set for the following meeting. So there is not much guidance to be had from government, either.
The high profile enjoyed by the troubles of the euro seems to have obscured the differences between the EMU and its main instrument, the single currency. Despite retaining an opt-out on the single currency, the United Kingdom signed up for the principles of the EMU at the Maastricht summit in 1992. The economic, trade and financial freedoms of the single European market have been immeasurably enhanced by the EMU -- witness the extraordinary increase in borrowing on the eurobond market mentioned above. UK businesses have shared in those: British Steel has used those freedoms to merge with Hoogovens and Vodafone Airtouch has bid for Mannesmann, for example.
Many enterprises recognise the inevitability of the euro/e-commerce imperatives and are making the right moves well in advance of 2002. Foremost among these are exporters, who use the euro to facilitate customer payments together with e-commerce to spread their distribution net. Others come into the action almost by accident. One catalogue supplier aimed its new e-enabled offerings at the UK market -- its first order was from the Netherlands, with a request to pay in euros! Other retailers have realised that whilst going through the work needed to euro-enable the systems of its Balearic subsidiaries, it would be sensible to look at Web-enabling in parallel.
++ Planning your unification
Whatever the motivation for embracing the euro and e-commerce, there is a difficulty for a United Kingdom company. Those in the eurozone know that they are working against what is now a very tight deadline for converting all their operations to a new base currency -- those in the UK do not, and they could be in this uncertain position for a considerable time. A current good bet is that the earliest the UK will enter the eurozone is in the beginning of the next government-but-one -- that is around 2007 -- but that is no better a guess than anyone else's. So UK entrepreneurs and managers have to plan for euro-enablement against a non-defined timeline. How to do that and e-enable at the same time?
For the start-up enterprise it is relatively straightforward. To get into eurozone e-business you open a euro bank account, hire a euro-savvy accountant and set up a Web portal. You have to remember that all your VAT records need to be in sterling. You also need to keep up with the lively debate that e-commerce is opening up about the legalities and taxation of cross-border Internet trading in Europe.
With multi-national software systems offered by such as SAP there are comprehensive facilities for euro conversion and taking your ledgers out to the Web. But there is a large and variable overhead in working on Enterprise Resource Planning (ERP) systems. Many companies find it more timely to establish separate e-commerce entities, lighter of foot than the mainstream activities and systems together.
Companies wishing to embrace the Web, but having a large investment in enterprise systems and data, have larger problem. They must first analyze and understand their existing applications, business processes and skills. Only then can they apply them to Web-business, euro-enabled as required.
The key is the framework they use to take the enterprise through to the creation of new e-business strategies, processes and applications. This entails:
- the transformation of existing enterprise applications, business processes and skills into e-business architecture
- the integration of data, information, business processes and applications to deliver new solutions from combinations of technology assets, and
- the management of Web content and application developments, and the resulting applications.
Such a framework leads to a more nimble enterprise, without jeopardising existing operations and revenue streams, ready to react to the changing markets and customer preferences, including those initiated, enforced or encouraged by the forces of the EMU and the euro. Many enterprises are acting now on the euro and e-business together, in the sure belief that in the 'wild west' of the Web, fortune favours those who take the e-business opportunity. Major accelerators of that opportunity are the EMU and the euro.
- - - - - - - - -
This article was contributed by Roger Annett, Euro Business Manager at Merant Consulting. Roger is a former managing director of Gestetner UK Ltd and of Britannia Security Group plc, and spent several years working as senior vice president for ICL in all parts of Europe. He can contacted on 01635 565 330 or roger.annett@merant.com. Merant is at http://www.merant.com.
-oOo-
+++ Events news
'Spring is sprung, the grass is riz,
the conference cos get down to biz'
Here are brief details of the first batch of this year's conferences with an e-commerce slant.
20-24 March. Software and E-business Development & Testing, Unicom, The Grange Holborn Hotel, London.
Five-day course, given by Paul Gerrard, Système Evolutif, and David Hayman, Testing Solutions. Delegates can select which days suit their needs best.
More at http://www.unicom.co.uk.
5-7 April. ICSTEST International Conference on Software Testing, SQS, Cologne-Bonn, Germany.
Covers test management, methods and tools. The final day, 7 April, deals with testing for e-commerce. More at http://www.icstest.com/.
10-12 and 17-19 April. Electronic Business seminars from Technology Appraisals in London. Covers XML and EDI for eBusiness and PKI Infrastructure. More at http://www.techapps.co.uk
19-21 April. WebCom 2000, Miller Freeman, Olympia, London,
Exhibition and (two-day) conference on e-commerce. Britain's main springtime event on Web-based working, now in its fourth year (previously known as Intranet Expo). Includes speakers from Berlitz, CMGI, Commerce One, DMR, eBay, HM Treasury, Intraware, Loot.com, NatWest Bank, Parcelforce, Safeway and Silicon.com. More at http://www.web-com.co.uk/subover.html
(Roger has an interest here, being the designer of this conference.)
8-11 May. E-business, Unicom, The Grange Holborn Hotel, London.
Conference and exhibition. Themes include customer management in the age of e-business, developing a winning e-business strategy, legal issues, security, and e-business and the Balanced Scorecard. More at http://www.unicom.co.uk.
24-25 May. eLogistics 2000, Worldwide Business Research, Radisson SAS, Brussels, Belgium.
Conference and exhibition, with post-conference workshop on 26 May. Aimed at senior logistics, supply chain and e-strategy folk. The theme is the strategic development of a pan-European supply chain. More at http://www.wbr.co.uk/elogistics00.
-oOo-
About eComWatch
eComWatch is edited and published by Roger Whitehead and Christopher Ogg. Copyright Roger Whitehead and Christopher Ogg, 2002. eComWatch may be circulated freely in its original format with copyright notice intact. For permission to reproduce any article,