Big Blue banks on e-commerce explosion

IBM is tipping 1997 as the year the Internet really begins to take off in terms of electronic business. Most of the issues have been solved, including security says visiting New York-based electronic commerce group vice-president Mark Greene. "I think all these things will make the Internet a mass-market phenomenon by the end of 1997."

IBM is tipping 1997 as the year the Internet really begins to take off in terms of electronic business.

Most of the issues have been solved, including security says visiting New York-based electronic commerce group vice-president Mark Greene. “I think all these things will make the Internet a mass-market phenomenon by the end of 1997.”

IBM estimates $US1 billion of paid-for commerce was done on the Internet worldwide in 1996 — equivalent to less than one day’s physical credit card transactions. It’s expecting $US3 billion of business this year, but a whopping $US200 billion in 2000. Greene says US regulations have been freed up to allow the export of strong cryptography in well-understood areas such as credit cards. “There’s a variety of encryption packages now, up to and including 1024 bits,” he says. Previously, export of an encryption algorithm was restricted to 40 bits.

“IBM has 23 encryp-tion pilots under way and expects to release production quality in September. That’s a release date that coincides with Visa and Mastercard’s instruction that all banks should be able to accept SET [secure electronic transaction standard] by September,” Greene says.

Permission to export strong cryptography will also apply to other parts of electronic commerce but the vendor must be able to demonstrate the ability to do key recovery. That is, if the US government had a need to decrypt a particularly message, it could be done.

“There’s broad industry support for that,” Greene says. “It doesn’t mean the government will be acting randomly — a court order will be needed, and that may involve courts in two or more countries.” IBM has qualified as a key recovery agent, he says.

Other Internet issues that have been or are being addressed include a lack of compelling merchandise, and navigation.

Greene says that at one time there were fewer things to buy, and they cost more, over the Internet. “That’s turned around in the past six months. Navigation was the other issue but next-generation, smarter search engines are now being rolled out.”

The remaining issues are those of consumer confidence and public education, which vendors are moving to address.

Greene, who is a former assistant research director at the Federal Reserve Board and more recently a senior consultant on Wall Street, says business to business is the main focus of electronic commerce.

To that end, IBM is engaging in a 40-city worldwide e-business forum. In Auckland, the message was: “How can our customers make money through electronic commerce.”

IBM New Zealand future strategy manager Mark Fowler told the forum: “Start with what you’ve got and grow quickly from there. It’s a low-cost exercise with no two-year projects.”

E-business refers to more than Internet-based transactions. It includes all business activity — from sales and marketing to operations and information management — that uses the Internet, intranets and local networks to solve problems, reduce costs, enhance value and create new opportunities.

In New Zealand, IBM business partner Electronic Commerce Network is offering a switch that links multiple business partners electronically. One customer may use EDI, another something as simple as the fax, but the switch handles the translation so the two can talk.

Last year IBM announced its Integrion project, linking 16 US banks over the IBM Global Network (IGN). “The initial focus is on home banking,” says Greene. “Three of the banks will roll out there first applications in July-August. “Essentially, the banks share the cost of the building blocks, and they’re doing their own certification (of digital signatures).”

He says IGN is currently being upgraded to 56Kb, using US Robotics’ technology. IGN has 850 nodes worldwide, making it by far the largest network in the world.

Bandwidth always places limitations on the Net but Greene takes a commercial approach to it. “The cost of low access is falling but large users are now willing to pay for premium, guaranteed capacity. We don’t sense an overall industry lack of supply of capacity. People will pay for what they want to get.”

There are no killer applications for the Internet, no magic bullet, Greene says. “The killer apps are what we do every day, renewing driving licences, paying bills and the like.

“The Net is now open for business.”

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