One-armed bandits underline IBM’s ‘year of e-commerce’

While the rest of the hardware and software giants battle about will we NC or won't we, IBM has its eyes firmly fixed on the e-commerce prize. It seems to have worked out the chief hurdles that need to be overcome before bringing e-commerce to companies waiting to e-trade. IBM is betting the bank on the combination of Lotus's easy-to-use Domino Web servers, and the integration that IBM can provide to core business systems.

The smiles on the faces of the Lotus-IBM crew told an even happier story than the speech from Victoria premier Jeff Kennett at the glitzy opening of the $A2 billion casino across the road.

While Kennett was expressing hope for a “casino-led recovery” for Victoria, the sound of coins clattering into one-armed bandits helped to underline the IBM-Lotus claim that 1997 will be the year of online commerce.

In fact, the air of confidence was so strong it sent me hunting for recent IBM share prices to see how the market felt about the company’s future prospects. Sure enough the IBM stock results on www.stockmaster.com/sm/g/I/IBM.html told a convincing story, showing a consistent movement upwards, well in excess of the general upwards trend of the US market.

So to what do we attribute this new air of confidence? When I spoke to Mike Antonelli, IBM’s programme director of network computing for the Asia-Pacific region, I expected him to tell me that IBM’s future lies in network computing — after all, that’s his area. But Antonelli was surprisingly low-key about network computers, admitting that perhaps the NC hype has led to unreal expectations about how quick the take-up of NCs would be.

I asked him to predict how the corporate desktop might look three years from now, and his answer was that he would be surprised if there was anything like 50% NCs there. The way he said it made me think that the figure he was predicting was considerably less than this.

Of course it’s easy to forget how big the PC market — which the NC manufacturers hope to gain a share of — actually is. Even a small share of such a big market is worth millions. But it’s hardly justification for the large hike in IBM’s stock prices, or explanation enough for the new-found bounce in IBM’s step.

But what I found most illuminating about my conversation with Antonelli was that, while the focus of the conversation was ostensibly Network Computing, by far the majority of the conversation -— and the part which brought about the greatest number of smiles from Antonelli — was about electronic commerce.

Antonelli spoke in depth about a number of e-commerce trials that IBM is conducting in the Asia-Pacific region in conjunction with Mastercard, Visa, and a number of large banks. At the end of April this year, IBM, Visa and Citibank delivered what IBM claims was the first live, secure, end-to-end Visa card purchase across the Internet.

The payment gateway which connected Citibank to the Internet was provided by IBM’s Commerce-Point software using what looks to be the emerging standard for secure Internet credit card transactions — the Secure Electronic Transactions (or SET) protocol being developed by Visa and Mastercard.

IBM’s lead when it comes to testing the frontiers of electronic commerce on the Internet is not by itself going to ensure that IBM dominates the e-commerce market. After all, both Microsoft and Netscape are snapping at IBM’s heels with their own online transaction pilots, and both intend to support the SET standard in their own e-commerce offerings (Microsoft’s Commerce Server, and Netscape’s Merchant System).

There was definitely something unshakeable about the IBM smiles that indicates there is something more solid than an initial lead underlying Big Blue’s confidence. So what is the secret ingredient?

Again, the clue came from Antonelli. We were talking about NCs versus PCs, when he made the comment, “Well, Microsoft might own the desktop at present but of course we own the enterprise.”

And he reinforced the point by claiming that more than 80% of Fortune 500 companies in the US run their core business systems on IBM systems. It was then that the penny dropped.

You see it’s these core systems that companies are going to need to interface to the Internet in order to conduct e-commerce.

IBM is betting the bank on the combination of Lotus’s easy-to-use Domino Web servers, and the integration that IBM can provide to core business systems, using features such as the CIC link and MQSeries link add-ins for Domino, and IBM’s commerce solutions which can piggyback on Domi-no Web servers.

What’s more, IBM’s MQ-Series link also allows Domino to be linked to non-IBM systems from Hewlett-Packard’s HP-UX to Sun Microsystems’ SunOS and Solaris to name a few.

So while the rest of the hardware and software giants battle about will we NC or won’t we, IBM has its eyes firmly fixed on the e-commerce prize. It seems to have worked out the chief hurdles that need to be overcome before bringing e-commerce to companies waiting to e-trade.

The first hurdle is ease of use. Setting up a server to provide secure online transactions needs to be easy to do. At Interweb, Lotus demonstrated the ease with which users of Domino.Merchant can set up an electronic storefront in a matter of hours, without needing to cut a line of code.

Although Domino.Merchant doesn’t yet support end-to-end transactions, IBM and Lotus promise that this will be available once the standards are ratified, and banks and credit card companies start to offer customers the ability to conduct SET-compliant transactions across the Internet —which may be as early as Q1 1998.

The second hurdle is winning over the banks and credit card companies to ensure that IBM can provide the other end of the end-to-end secure transaction. The tests and pilot projects IBM has been involved in to date, indicate that IBM is well down this track as well. And there is the added advantage that when it comes to dealing with the big financial institutions IBM is on home turf.

These are IBM’s traditional customers, and it is intimately familiar with the systems they rely on to provide them with their core business systems — most of them run on IBM hardware and software after all.

With a little of Victoria’s “casino-led recovery” jingling in my pocket, I left the conference feeling that with the injection of Lotus into the mix, things were looking more promising for IBM than they have for years. Perhaps the addition of a little yellow was all that was needed for Big Blue to make a lot more green.

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