Trickle-down success stories
Posted by Webhost - 30/12/96 at 01:12 amThe Net’s popularity has spurred a trickle-down effect in the computer
industry, and even companies not usually identified with the Internet are
learning quickly how to get their share.
Heavyweights such as Cisco Systems (CSCO), Computer Associates (CA), and
Federal Express (FDX) have all implemented strategies for bringing in revenue
with Web-based projects, from selling Internet services to setting up
e-commerce sites.
CA and Federal Express, for example, are both adding a division that will
provide Web site hosting to other companies–a move outside their core
businesses that they expect to bring in substantial additional revenue. Cisco
hasn’t modified its business model for the Web, but it has focused a great deal
of energy on promoting a new e-commerce site that sells Cisco’s networking
products over the Web to customers that would otherwise have been buying
through a sales representative.
International Data Corporation analyst Michael Sullivan-Trainor says more
companies–like Cisco, FedEx, and CA–will be looking for variations on
Internet themes in order to bolster their business operations in the coming
years. As they plow more investment into their own Internet infrastructures,
they will seek ways to use their Internet prowess to create new profit centers.
And this, Sullivan-Trainor says, will create a “cascading effect” that will
increase business opportunities not only dependent on, but peripheral to, the
Internet.
CA, a database and systems management stalwart, now hosts and manages Web
sites. Federal Express has taken its core expertise in overnight shipping and
woven that into an electronic commerce scheme that it expects to generate new
and lucrative revenue streams for the company.
“There is no doubt that commerce at the end of 1996 is catching fire,” said
Steve Mann, CA’s marketing director for its recently created NetHaven, a
business unit, formed in August which offers Web site hosting, site management,
and electronic commerce.
The division’s benefits to CA are threefold. First, the division makes money by
selling the services but it also gives CA a new channel for pushing its systems
and network management software to customers trying to tie their Web-related
administration to the rest of their network.
And it gives CA an opportunity to create and market brand new software. CA’s
NetHaven plans to roll out its NetCart software in January, which is designed
to help businesses easily set up electronic commerce operations. NetCart will
help existing Web sites add electronic catalogs and credit card processing
features and will help customers change the look of their sites with different
“themes.”
FedEx has a slightly different take on its Web hosting business. It plans to
offer BusinessLink software packages early next year that will help other
companies create electronic product catalogs that the express carrier will host
on its own servers. But since it isn’t a traditional software developer, the
overnight delivery company plans to make money by charging a transaction fee
for every item ordered through its central Web site hosting facility.
Cisco meanwhile says it expects to generate record revenues next year from its
Internet business-to-business commerce. In fact, Cisco recently projected that
as much as 30 percent of its sales–or more than $1 billion in revenues–will
come from customer transactions over the Internet by the end of the fiscal
year.
Cisco’s dedicated electronic commerce site, the Internetworking Product Center,
generates over 100,000 transactions each month from 58,000 existing customers
and new converts to Cisco’s products, company officials said. The networking
giant, stretched as it expands its sales and technical support staff fast
enough to match its booming growth, is essentially turning to the Web for
relief.
“The World Wide Web is ready for business today,” said Chris Sinton, director
of the company’s Web site Cisco Connection Online. “The goal is not to automate
ourselves but to improve our relations with customers and partners,” Sinton
said.
There’s no way of proving that Cisco wouldn’t sell as much without its Web
site, but the company points out that the Net sales will save roughly $250
million in staff costs. The highly visible success of its online business also
sends a message to Cisco’s competitors that a new sales frontier is emerging.
Cisco is ahead elsewhere too: tapping into a less publicized but the extremely
profitable business-to-business transaction market . Market researcher IDC
projects that the entire e-commerce market, including sales to consumers– will
grow to $160 billion by the year 2000, but that business-to-business
transactions will represent 95.6 percent of that pie. That’s up from 81.5
percent of the existing market.
