In the Shadow of the Internet
- Published on Thursday, 25 October 2007 21:34
When visionaries look into the future to describe the brave new world of business empowered by the Internet, few look at the shadow side: the vulnerability that results from all the advantages inherent in doing business over the Internet. Advantages like running more efficiently, reaching new markets, cutting down on administrative overhead, and providing your suppliers, customers employees and business partners around the world with 24-hour access.
Is this scenario science fiction? Not at all, and this future is rapidly becoming the present. IBM conducts a worldwide Internet Market Survey which is updated quarterly to reflect the rapidly changing landscape. As Figure 1 shows, a six month snapshot shows dramatic growth of usage of the Internet. The rising use of IP technologies is transforming the traditional business model. Our core business processes are being re-engineered to leverage the Internet, corporate intranets and extranets. The benefits are clear: increased efficiency, new routes to market, reduced overhead, improved customer service. As Figure 2 illustrates, the growth of business on the web is literally exploding in the second half of this decade. As the benefits become more obvious, the race to implement the underlying applications and connectivity is on. The writing is on the wall: those who dare ignore it endanger their competitiveness, and even their survival.
Oenophiles Take Note
Virtual Vineyards is an upstart business that is changing how we buy wine. Oenophiles (that's wine fanciers to the uninitiated) are attracted to the site by information, namely the expert advice of wine expert Peter Granoff. He personally tastes and reports on wine which you can then purchase through the site. Another attraction is the single source Virtual Vineyards provides for high quality, low volume vintages. They take CyberCash or credit card. In the first year they achieved over $1 M in sales, and in the second expanded their work force to 14 full-time workers to handle over 80,000 visits per month as they enjoyed a 370% growth rate. Without their connection to their customers, there is no business.
Where Fortunes are Made and Lost
Of course your company probably isn't in the wine business, so let's look at a business that is a little more mainstream. With the meteoric rise in the stock market over the last decade, you can't get much more mainstream than the brokerage business. Baby boomers are investing like crazy, trying to prepare for a well-earned retirement. And, increasingly they're being drawn to on-line trading. The appeal is convenience and price! Charles Schwab was one of the first discount brokerage firms to leverage the Internet when they set up a web site in March of 1996. Already half of all new accounts are opened by investors using the Net, and three out of ten buy and sell orders are coming through the Net.
And yet the competition is not far behind. Although Schwab's position in the forefront has gained them 50% of the market within their first year, only six months later their share had dropped to 35%. They've been followed by startup E*Trade, a broker with no trading room floor and no infrastructure except the Digital and Sun systems that support their web site. E*Trade has significantly undercut Schwab's price, but already others are undercutting E*Trade, such as Datek, an Iselin, NJ based discount broker whose web site does business $9.99 per trade.
There are two lessons here: the race is to the quick, and none can afford to dally; that's the most obvious one. The shadow of this success story is that this competitive edge soon becomes a necessity for survival. And what better definition could there be of a critical application, one that needs the full protection of a disaster recovery plan.
The Race is to the Swiftest
While the examples we've looked at are consumer-to-business applications, most of the business on the Internet is actually projected to come from business-to-business e-commerce. According to Forrester Research, sales over the Internet are expected to total $327 billion in five years. And over half of that is expected to be business-to-business. My bet is on Prudential Insurance to be one of the leaders in this race. Their new CEO Arthur Ryan is so certain of how critical the new technologies are to his company's success that he's committed $1 B to enhance their IT infrastructure by installing a huge TCP/IP network. When he's done, his goal is to achieve what he calls 'universal access'. While many of these customers are individuals, you can bet that the real leverage in cost savings comes from business-to-business communication. Ryan has been quoted as saying that his real risk is not the money he's pouring into the technology, it's the risk that the competition may beat him to it.
The message is clear: if your company's survival depends upon your connection to the Internet, then you cannot afford to suffer a disconnect. In most cases the development of these critical new applications is already underway. And the lesson that we've learned before applies here: it is much easier to engineer in recoverability during the design phase, rather than trying to figure out how to retrofit later.
There are a number of options you can explore to bring recoverability to your web-based applications : all the way from doubling your capacity onto mirrored servers at alternate locations to finding a hotsite provider who offers Internet traffic rerouting. Whatever you choose, you'll be a pioneer in your quest.
According to a survey of 226 business recovery managers interviewed by IBM last year, only eight percent of companies doing business on the Internet have a business recovery plan in place. Pioneers face unknown risks; but the risk of being unprepared for a disaster in the Age of the Internet are far greater.
Barbara Bennett is the Network Services Delivery Manager, North America for IBM Business Recovery Services. She can be reached at firstname.lastname@example.org.