Article: The Dream Still Lingers

by Rob Spiegel

Remember how the world was going to change? Smart sensors in your
refrigerator would notice that your milk freshness date had expired and it
would add a half gallon to your electronic shopping list. As items gathered,
you would click the list over to WebVan, which would bring groceries to your
door. WebVan, of course, is gone, and my refrigerator certainly doesn't have
any sensors.

The WebVan demise produces two responses. The Itoldyouso group gets one
more example to support its belief in the utter weakness of the Internet.
This group never believed for a second any of the sweeping claims of the new,
new economy and the transformative power of a fully connected world.

The headinthesand group gets to explain, yet again, that WebVan's problem
was weak management at the top. The executives betrayed a great idea with
their stunning incompetence. This group believes the Internet has already
conquered the world and that the distraction of WebVan's collapse clouds the
clear success of the Web.

I'm still struggling with a third point of view, which goes something like
this: We don't know yet where and how the Internet will affect our lives, but
eventually, there will be profound changes. Television has certainly had a
profound effect on all of us, and the Internet is like a few hundred
potential TVs. Only right now, we don't know which of these will take root
and grow.

There are two clear winners already. Both of them have affected business more
than consumers. One is email, and the other is businesstobusiness
ecommerce. Email has connected family and friends in a new manner, which
helps in a world where children typically live in different states than their
parents. But email is not equal to the telephone in its ability to let family
and friends really communicate.

For business, however, email has completely eliminated the typewriter.
Business correspondence, proposals, blueprints, legal briefs, all of these
standard business communications now travel over the Internet delivering
considerable savings to both the sender and the recipient. Count me among
those who are convinced that email is truly the Web's great killer

The other area of the Internet's phenomenal success is businesstobusiness
ecommerce. This may seem a strange statement, given the absolute crash of the
dot com world and the beating taken by virtually every public tech company.
Mention the word emarketplace and people snicker. Companies like Ariba,
Ventro and VerticalNet were considered giants just a few months go. There
companies were going to be the next generation's GMs and GEs. Now they very
well may be moving along the same sorry path as WebVan.

But something very big is happening within companies, and it is going on very
quietly. Ten years ago, companies allocated about 10 percent of their capital
spending to information technology (IT). IT these days is virtually
synonymous with Internet technology. This year, IT spending constitutes more
than 50 percent of all corporate capital spending. And even while
corporations are laying people off and cutting spending on everything from
new facilities to professional education, Gartner just reported that 53
percent of Fortune 1000 companies have increased their IT budgets by more
than 20 percent this year.

Why are companies increasing their spending on Internet technology when those
dollars could be spent on retaining employees or could be passed down to
shareholders to bolster stock prices? There is one simple answer to the
question. The dollars spent on Internet technology deliver a
returnoninvestment so quickly, companies get their cost back out of the
investment within weeks. Many CEOs now turn to their technology and
information executives, saying, "Can't we do this faster?"

Large corporations are spending millions upon millions creating private
networks to connect out to suppliers and customers. Cisco Systems has
reportedly spent 300 million building its network. And these companies are
also getting their millions back in efficiency savings. Who says the Internet
is a bust?

P.S. Wonder why Ariba, Ventro and VerticalNet are doing so poorly if
companies are spending so much on technology? It's because the tech dollars
are now going to companies like Oracle, Microsoft and IBM, companies that
have become ecommerce giants.

About the Author

Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring
Entrepreneur's Guide to the Best HomeBased Businesses (St. Martin's Press).
You can reach Rob at

Related Resources