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New year, new century, new millennium - new channel?

New year, new century, new millennium - new channel?

LEAD FEATURE

It is hard to have a sense of history in an industry as fast paced as IT. Here, technologies, allegiances and people replace each another as often as .com businesses did in the last year of the 90s, only to stage unexpected comebacks the way channel distribution models are supposed to in the unfolding noughties.

Often the only way to create some historical order in the natural, compulsive, yet creative disorder of the IT world is gauging the verity of what was predicted against what has been done and achieved. Sometimes that means that once-serious concerns (such as those about the Y2K bug) migrate from the sphere of market-drivers into the zone of conspiratorial dollar-generating hoaxes in the same speedy and condensed historical manner in which they became the objects of the industry's concern in the first place.

But despite all of last year's gloomy predictions, superstitions and paranoias, the year delivered a heroic performance as a fitting close to the chaotic and unpredictable 20th century almost with Brando-nian perfection. Conquering the Y2K non-compliance monster, dealing with memory shortages, witnessing the slow demise of the ERP and the rise of ASPs and realising that we are not as globally wired as we thought after all, have all made the last year of the 90s memorable. In addition, the industry has not collapsed as predicted by the doomsayers of the skills-shortage catastrophe and the channel has steadfastly refused to give in to the e-commerce-commissioned Grim Reaper salivating over resellers' supposedly imminent commercial death.

On a more negative note though, it seems that even after a couple of years of extreme movements and measures - the words `compliance', `death' or `consolidation' are unlikely to be replaced in channel vocabulary by new or less threatening prophetic milestones for at least another 12 months or so.

Most industry experts agree with analysts at International Data Corp (IDC) who believe that getting used to the noughties will mean continuation of the 1999 trends as dictated by the Internet and e-commerce rise for most of the IT world. Issues such as Internet stock correction, the proliferation of free Internet access, products and services, industry consolidation (as heralded by the AOL-TimeWarner deal) and de-Americanisation of the e-commerce space are high on the list of likely global events for 2000.

According to Ray Bradbery, vice president of Inprise Asia, as the growth of hi-tech companies and Internet technology adoption rates continue to gain momentum, the fortunes of Australian IT companies could go either way. `Despite the early hiccup on the NASDAQ and the ASX, the exponential growth of the hi-technology companies will continue and indeed intensify,' Bradbery portended, explaining that in Australia that growth will be driven by the further, `massive adoption of the Internet'.

`Australian-based companies, regardless of size, perhaps for the first time will have a fantastic opportunity to offer their services on the world stage, without needing to heed country or locality boundaries.'

Echoing IDC's predictions of further consolidation and globalisation of the e-space, Bradbery however pointed out that the removal of geographic barriers will also open the Australian market to global competition, warning IT companies to prepare to face unparalleled competition.

Taking Bradbery's warning a step further, Bahram Boutorabi, CEO of Sydney-based Internet technology specialist Creative Digital Technology, predicts that dealing with the globalisation of the IT marketplace will present a major challenge to Australian companies and the channel in particular, not only during 2000, but also in 2001.

`IT/communication/Internet provided the platform for the global economy. It is now our turn to utilise it or be consumed by it,' he asserted.

Using the analogy of small town and corner shops that thought they were `safe' from extinction until the arrival of big supermarkets, Boutorabi said he believes `the realisation of globalisation of businesses will start on a massive scale', affecting all technology, trends and issues. `Global is here to stay. Our challenge is to use it to our advantage.'

But positioning Australian companies for the 21st century need not spell out `death' or `consolidation', especially for the channel that, according to IDC, is about to `stage a huge comeback in a variety of Internet-centric forms' called `e-channels'.

Udo Brand, director of channel acquisitions and mergers specialist TechNet Capital, believes one of the biggest trends to watch in the new year will be the proliferation of e-tailers that will continue to build demand for fulfilment companies such as distributors, even if it also opens the door for global logistics companies to move into competition with distributors. `Resellers don't care where the product is shipped from,' he said.

Apart from proliferating e-commerce opportunities such as shopbots, portals and virtual malls, industry savants believe most e-opportunities for the Australian channel will arrive in the form of business-to-business and application service provision (ASP)-development.

`This is the year when people will realise that Web sites can make up a significant part of their business,' offered David van Toor, managing director of financial software and ERP specialist Epicore. `Realising that there is life after Y2K, most of them will spend their time developing business-to-business sites, which means that online integration with back-office systems will experience huge growth,' he said.

As a second wave of e-commerce adoption washes over Australian shores, supporting business-to-business and e-procurement development will, according to Brett Hannath, applications marketing manager at Oracle, preoccupy most businesses, whether a part of the channel or not.

`On the business side of things, getting Web sites up is something that's been looming over businesses' shoulders for awhile, so, just as Y2K compliance was the focus of 99, 00 will keep business-to-business and e-procurement in focus.

`We at Oracle think that, in an attempt to supp-ort the business-to-business push, the IT channel will experience one of its greatest reincarnations, especially as XML support for business-to-business development takes off next year.'

Nic Pollock, managing director of Sydney-based enterprise software vendor Viewlocity, agrees. `I sense a real desire by many organisations to really sink their teeth into e-business,' Pollock revealed. `To date, they have been hampered by a combination of `watch and see', but now that Y2K is over and done with, many organisations will want to really start getting into strategic projects that help their business rather than legacy replacement, which means that a lot of pent-up demand for e-business will be released.'

However, according to Frank Cuiuli, channel development executive of enterprise newcomer IT Factory, faster e-commerce adoption could also suffer setbacks unless Internet security issues are addressed soon by Australian developers and the Government. `There is a pressing need for the Federal Government to finally address privacy issues in Australia if they're serious about uninhibited e-commerce growth,' Cuiuli commented.

`Security issues are proven inhibitors of e-commerce growth and despite the fact that a lot of product development has been done in this area, there are still problems with consumer and business confidence in using the Internet for e-commerce. Businesses don't want to spend extra money on security yet and the Government is not addressing the issue and that has to change.'

While part of the reason for the reluctance of businesses to spend additional dollars on security lies with the financial pressures Australian businesses have experienced as part of Y2K remediation and in preparation for the GST introduction (another key issue in the Australian IT year 2000), that, according to Oracle's Hannath, is not likely to change soon as businesses are pushed further into finding ways to reduce the cost of their IT infrastructures. Nonetheless, instead of causing an Internet activity slowdown in the channel, both Hannath and Inprise's Ray Bradbery see the infrastructure cost-reduction trend as crucial to its growth, especially when it comes to the projected massive growth of the ASP segment over the next 12 months.

`The ASP sector will fundamentally change the way Australian companies do business today,' Bradbery said. `Companies that currently offer specialist services have a massive opportunity for growth [in this arena]. For example, a company specialising in customer billing systems might begin instead to host billing services on behalf of many corporations, removing the overhead of managing the system [from corporations' budgets].' But Bradbery warns those in the channel that they need to make their ASP move sooner rather than later `since the first few companies to provide an offering will own the vast majority of the market.

`Service companies, aided by systems integrators and IT providers, are all searching for the killer application in their vertical industry, so the development of these applications will feed the ASP industry for many months in 2000,' he said.

With the GST being the next big hurdle Australian businesses need to overcome, however, ASPs could experience an uphill battle in the world of small business where the GST is likely to have more impact than at the larger end of town. Crucial to this battle, says IT Factory's Cuiuli, is the need to understand the ASP model a bit better, which he believes cannot be taken care of simply by making applications more affordable.

`In the ASP arena, IT companies will need to partner with each other a lot, but it is the reseller who has to educate the market,' he said.

Most of all, however, the year 2000 will be about delivering on promises the industry has made in their collective e-commerce and Internet sales pitch to the public and whether the channel will succeed in doing that we won't know until the books are balanced in 12 months time.

Looking ahead over 2000 - IDC predictions1) An Internet stock correction will be made (again!).

2) Numerous bogus warnings will be made of a consumer Internet slowdown.

3) Free Internet access (and hardware and software) will explode.

4) Key Internet segments - portals, online travel, finance, retail - will consolidate.

5) The death of .com: Internet pure-plays will buy into reality.

6) New virtual malls will arise as commerce magnets.

7) Channels will stage a comeback.

8) B2B transactions will make up almost 80 per cent of e-commerce transactions.

9) European online presence will surge, with European .coms invading the US and global online markets.

10) Broadband to the home, home LANs and eWallets will emerge as technology winners, but Wireless Web will stumble.


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