Refelections and Predictions

This is the season for reflection and predictions, and for most of us, a well-deserved break. Needless to say, the world is crossing the threshold into the era of the Wired Marketplace, and events in 1998 have paved the way for this to happen.

1998 was the year of building a platform for Web commerce. By "platform" I don't mean hardware, but all the elements needed, including an adequate installed base of devices and users accessing the Web, and the incentive for these users to buy on-line. These are now all in place in South Africa; we are rapidly approaching a million Internet users, and there is already a significant merchant presence on the Web. Certainly, one of the biggest "events" in 1998 was the huge investment on the part of major IT and other industry players seeking to be the e-commerce channels of the future.

While local merchants are still catching up with global role models, South African Web shoppers can buy direct from overseas.

Local shoppers already have sufficient incentive to use the Web in many categories. In other areas we are still way behind. While local merchants are still catching up with global role models, South African Web shoppers can buy direct from overseas, provided the product is of a global nature (e.g. books, gambling, musical instruments and rare collectibles). However, local Web merchants are key to transactions involving essentially local products and services, e.g. cars and real estate, and most financial services and jobs.

Overseas jobs and financial services are also useful to some, but the vast majority would seek local content most of the time. Where we are certainly still way behind is in areas like on-line grocery shopping, which has taken off in a big way in the USA. Shopping for clothing is also big business there. We simply do not have a catalog shopping mentality in the country, which has existed in the 'States for more than a century.

So if the incentive to Web-shop is in place for South Africans, where is the action? So far it seems to be isolated to niche areas, like shopping around for cars, real estate, jobs, trading in securities, and purchasing computer hardware and software. There are also significant numbers of South Africans using Internet Banking services. Web-based financial services grew dramatically in 1998, and now account for significant transaction value. Dell is selling large volumes of computers, and there are a few other success stories. These isolated cases aside, I think it is fair to say that despite the platform being in place, the potential remains largely to be realised.

1999 will be the year that Web commerce really begins to take off. This has already begun to happen in the USA, where on-line gift shopping looks set to take a sizable slice of the 1998 Christmas spending pie. Although there are some new sites in South Africa aimed at hitting the Christmas sweet-spot (particularly toys), it remains to be seen how successful they will be, in practice, this season.

Prediction #1. So my first prediction is a major growth spurt in 1999, as more consumers perceive the value of Web shopping. This value is perceived when the new modalities of Web shopping are understood. Most South African consumers do not currently appreciate the subtleties of the electronic marketplace, which is significantly different to old style commerce. Many still see Web shopping in the mould of Internet banking, which is not really a new concept - its modalities are very similar to that of other forms of electronic banking. Once these new functionalities are understood, consumer Web shopping will begin to take off.

Prediction #2. Another important area of development in 1999 will be in the area of direct marketing, coupled with loyalty programs. Already significant investments are being made by players like Linx and Affinity Logic, and the retail industry is taking this very seriously. No less so the media industry, and the financial services community. 1999 will see a continued scramble for position in this area, in preparation for the next big wave of consumerism. This wave will be largely facilitated by Internet technology, but the reality is that the real power lies not in the Internet as a network, but in the databases of detailed consumer profiles.

Prediction #3. My third prediction is a rapid acceleration in adoption of alternative Internet access devices - WebTV, smart hand-held devices, game controllers, screenphones and the like. My personal forecast for South Africa is that cellphones will outstrip all other types of alternative access, due to the significant adoption of these devices already. As PDAs (Personal Digital Assistants) and cellphones become increasingly the same thing, the barriers to accessing the Internet will come tumbling down, particularly for applications like remote banking and purchasing tickets - not to mention e-mail.

This leads to Prediction #4, which has to do with e-mail. Anywhere, anytime connectivity will dramatically accelerate e-mail usage, and it will become the dominant mode of general business communication in the next two years - outstripping telephone and fax. In support of this, companies will beef up their communications management systems for greater security and privacy. There will also be greater integration between call centres, PABXs and the Web, and multi-modal communication on the desktop (including videoconferencing) will take off on a global scale.

Prediction #5. The biggest growth in actual Rand value of electronic commerce in 1999 will not be in consumer spending on the Web. It will be in business-to-business activity, related to supply chain management, and this will not always equate to Internet or Web commerce. Although Internet technology and connectivity will be central to the rapid expansion of "B2B" commerce, much will not take place over the public Internet, but over so-called "Quality of Service" virtual private networks. Although 1999 will be an important year for B2B commerce infrastructure building, it will take most organisations a number of years to implement their systems and begin transacting in great volumes. Nevertheless, substantial growth in transaction volumes will take place next year, as new players come on stream.

Prediction # 6. IP will, however, be a dominant protocol, and huge growth will take place in IP-based VPN usage in 1999. Demand will be stimulated by vendors, including Telkom, rolling out massive networks, and by attractive packaged service offerings. VPNs, both QoS and Public Intenet based, will also be widely adopted by South African businesses, as indicated by a recent BMI-TechKnowledge study.

Prediction #7. Year 2000 focuses the mind. Clearly 1999 will be the pivotal year for solving the Y2K bug crisis, and this will inevitably distract attention and resources from all of the exciting things discussed thus far. Nevertheless, many e-commerce projects are rolling out "full steam ahead", and momentum will not be lost completely.

Prediction #8. The Y2K bug will not be fully solved before the Year 2000. I believe that despite the publicity currently being showered on the issue, many organisations, especially in the smaller government departments, will run out of time and resources to solve their Y2K problem before January 1^st 2000. In other words, there will still be lots of Y2K projects running after this date, and new funds will have to be urgently released to solve mission critical problems after the event. Funds alone will be insufficient, however, as skilled resources are limited, and will be thinly spread around.

Prediction #9. Lots of other people will be making predictions for 1999.

Prediction #10. Most, but not all, of these predictions will actually come true.

May we take this opportunity to wish you all the best over the holiday season, and health and prosperity in the exciting and bumpy year ahead.