Serious retrenchment is taking place among vendors right across the IT sector. The problems at BT and Cisco are well documented, and network equipment maker 3Com is the latest of a long line of tech giants to deliver sombre news. 3Com just announced that it’s cutting its workforce by 30% – that’s 3,000 people. Web hosting giant Exodus is laying off 675 people – 15% of its workforce. And Dell says it plans to cut 3,000 to 4,000 jobs – which will be about 10% of its staff.
Nearly 200 internet operations have closed down completely, according to The Industry Standard’s Flop Tracker. The same publication’s Lay-off Tracker shows that by mid-May over 100,000 jobs had been cut at internet firms or divisions in the US and elsewhere.
The firms taking the biggest hits are in the infrastructure business – either providing the hardware for the internet economy, or in consulting or services. Hardware vendors face the additional problem of cheap second-hand kit flooding on to the market as customers cancel projects or go to the wall. This has been a particular problem for routers-and-switches king Cisco, and for big server vendors such as Sun.
But if we turn away from IT infrastructure firms, to companies actually using the Internet for e-commerce, the picture is more mixed. Yes, there have been the numerous well-publicised flops. But other firms are enjoying their experience of the internet.
One success story is budget airline easyJet. It is now selling nearly 90% of its seats direct via its internet site, up from 60% last year.
These sales are substantially cheaper to make than those that competing airlines complete via travel agents, and cheaper even than those made via easyJet’s own telephone call centre.
Tesco, meanwhile, is still running its online shopping business at a loss – but the supermarket chain is satisfied with the volume of business it is generating. Sales via Tesco.com were worth #237m in the year to February 2001; it receives 70,000 online orders a week.
Even in the gloom-afflicted telephone sector, there have been some striking successes. Japan’s NTT DoCoMo has posted a 45% increase in profits for the year ended 31 March, on sales that are up 26%. DoCoMo is Japan’s largest mobile-phone service provider and the company behind i-mode, a simpler alternative to WAP which allows users to swap email and access certain internet services from their mobile phones. The number of people subscribing to DoCoMo’s i-mode service quadrupled over the year – there are now 22 million.
There are several reasons why i-mode has succeeded while the uptake of WAP over here in Europe has been disappointing. Though it is less suitable for browsing than WAP, i-mode is often better for the things people really want to do. There’s no waiting for a connection, making it ideal for email and accessing short snippets of information. It’s also cheap, both for users and companies offering services via i-mode.
In Europe the big success in the phone sector has been even simpler – text messaging (or short message service, SMS). In the UK, between 800 million and 900 million SMS messages are now sent every month, according to industry grouping the Mobile Data Association.
The lesson in all four of these examples is more than just to keep things simple. The key thing is that the technology is being used primarily as a means of making effective person-to-person or person-to-business contact.
The value, to business, of basic communication has often been obscured over recent years by an over-emphasis on content and the web sites themselves.
The boom in text messaging makes clear what people are really interested in – and it’s contacting other people. Texting gives us a new and convenient way to do this, and has turned out to be more compelling to consumers than giving them a way of browsing web sites from their phones. Similarly, the main use of i-mode is for email.
Browsing isn’t interesting to most people unless it’s got some point.
So easyJet.com is not a vast site full of travel articles and pictures of distant places. Instead, it is somewhere you can go to book flights – a more efficient substitute to visiting a shop or using the phone. It doesn’t get sidetracked into trying to be a travel magazine or TV programme.
Similarly, Tesco.com doesn’t have pretensions to being more than an effective online catalogue and ordering service.
Poor leadership in IT
CMP’s global survey of IT and business professionals found that 75% of companies intend to increase IT expenditure in 2001. But 35% of individuals feel that poorly defined strategy may prevent IT objectives being met, with 28% citing poor leadership as the root cause of failure.
IT causes merger failures
A fifth of the potential mergers and acquisitions that evaluate IT are abandoned as a result of IT problems, according to research by The Bathwick Group on behalf of Microsoft. Worryingly, only half of CIOs are consulted when a merger is being assessed.
Law firm security is lax
A quarter of companies in the UK financial sector carry out internet security testing, compared with just 4% in law, says NTA Monitor. The survey also notes three times as many local government sites are tested by third-parties compared to central government.
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