THE COMMERCIAL INTERNET

Institute for International Research

San Francisco, California
June 15-16, 1995

MEETING NOTES
by Barbara Meyers
* Unabridged Version *

© 1995 Meyers Consulting Services
IP News (Internet Edition) Fall 1996

These meeting notes are provided here because even though "The Commercial Internet" seminar was held in June of 1995, the information imparted has had very limited distribution as an aggregate in the scholarly publishing community and is still quite useful. Among the nearly 60 participants, only two were publishing professionals; myself and a delightful chap from the Publishing Services Department of the Australian government! Some of what the speakers had to say has filtered out via other presentations, but I am hoping that having the whole of the seminar's fine content will be useful to your thought processes as a professional and scholarly publisher exploring your organization's potential on the Internet/WWW.

Cheers, Barbara Meyers, Editor, IP News, and President, Meyers Consulting Services

Opening Remarks - Anita Schiller
Director of Electronic Marketing, Silicon Graphics

Estimates of the number of users on the Internet range from 1.3 million to 30 million with 1 million new users added each month. In the "Commercial Sites Directory" which is available online by Open Market, there are 7,455 registered sites with Open Market (10% of those were added in the last week). Yahoo has registered 4,700 sites. The number of commercial domains is now greater than those from education (.com >.edu).

In 1994, 100-200 articles were written about the Internet in the popular press. In the first half of 1995, 16,000 articles have been written. Yet, with all this, most CEOs, COOs, CIOs still don't have computers on their desks at work ... or if they do they don't use them. But, these same executives have PCs at home and those are used for consumer (commercial) activities.

Even the "experts" are learning as they go for there are issues still to be resolved:

  1. Security - especially in business-to-business transfer of information
  2. Selling - manner of payment
  3. Bandwidth - insufficient to handle the world's need
  4. Legal implications - privacy, intellectual property, contracts

J. Snyder
Webmaster, Dell Computer

The Dell Online Services Team created a Home Page in 1994 containing 300 megabytes of user information. They will change the "look" of the Home Page and portions of its content every three months. A lot of the information on the Net is completely static and users find few places with information of direct relevance to their needs. At the Dell site, they are providing information to try to bring people into the organization (e.g. employment opportunities listings). Dell is focusing on getting all company information converted into one large database so that the public portions can be globally accessible and they can have intra-company connectivity for the entire database as well.

Dell has a development server + fire wall + website that is maintained by 1.5 people (although J says he needs 20). The Webmaster is the pointman in the company for all email communication with customers. The Webmaster does not create content, but he "approves" the content in terms of editing and workability of file structure and trains people to create HTML and the like.

The Online Services unit at Dell handle all non-phone communication with customers using AOL to point directly to the Dell Website. The Federal and Commercial divisions are more interested in providing information than their Direct Marketing Department because Dell views marketing information as one small segment of all Dell information on the Net. In fact, most pricing information is downloaded by fax rather than online. After sale information will be tailored to each customer's account.

At the present time, Dell has 50,000 accesses per day which is equivalent to about 10-20,000 users per day. About 70-80% of the traffic is through Netscape browser.

Dell gathers the following information about users:

  1. IP address: domain name + individual machine
  2. time
  3. date
  4. what they requested
  5. what Dell sent in response; nothing is sent unless requested.

Interplatform compatibility is the greatest strength of working on the Web. Security issues will be around for a long time. Security and privacy are very interrelated. Current legislation is a concern until the year 2000 when the RIO patent expires.

"Names" will become a very big part of the Net so people will know who to trust, but you can make a name on the Net that sounds like something bone fide when it isn't. (The now old joke: "Nobody knows you're a dog on the Internet.")

John Gilstrap
Senior Director, New Business Development & Strategy
Philips Media, A Philips Electronics Company

This new media arm of Philips Electronics is dedicated to becoming a leading player in high-growth businesses within the MM (multimedia) arena. PM is based on four business units:

Software Services Cable Systems
Among the top 5 CD-ROM publishers worldwide Migrating US PC & online tech to Europe; plus traditional cable and pay-for-view Largest private multisystem company in Europe CD-I systems providing user site access

Philips has developed a number of proprietary system products. Two examples:

  1. SMTN - SuperMarket Trade Network - for the food industry which is software designed to hook buyers & distributors online. It doesn't replace traveling to visit customers, but it augments and helps the sale and the process.
  2. DIBS - Digital Image Bank Service - a proprietary service for advertising based on digitizing all the various products (in all their sizes) and maintaining a large database that ad agencies can access for store circulars, catalogs, etc. instead of reshooting for every new promotions. (Competitor: Kodak's News Media Main Market)

Corporations often use proprietary systems (such as Philips) for the transfer of sensitive (e.g., pricing, planning) information and payments rather than passing it on the Net or the Web, even though Philips is developing the ability to secure information transfer via the Net. But no one is there yet. Payment transactions are not EDI, but use proprietary Philips systems. When security and bandwidth issues are resolved then Philips will move from proprietary systems to the Web. Right now, Philips Media Website is based on off-the-shelf software for real-time chats with video imaging (they call this video-conferencing).

Consumer preferences and willingness to pay are untested. In the meantime, Philips is experimenting with commercial services such as AOL as they believe that one of these will "pop off" and Philips wants to be there when it does. There is a limited array of products that sell well on the Internet now because you know what you would be getting and you can get what you want. Those being: flowers, books, and software.

You need to create a "brand name" and have it stand for something on the Net. You need to exploit the use pattern; that is, create an environment for people to meet, discuss, and communicate --- create a community. You will "sell" product via mentions and teasers which will prompt people to go out and buy. Being on the Net gives you the image of being a hip [sic] company that's into multimedia. But you need to keep your site fresh by changing the content often as these users get bored easily.

Moving into this business is like starting a new TV channel. Philips trademarked the name "SMART AGENT" so they will be ready when they will be fully implemented on the Web. A business needs to figure out what it wants to be and figure out what their consumers want, then go out and find the content that matches all that. To do this, you need the right people. Example: A high-level, senior manager in corporate headquarters called John one day with a problem concerning his laptop computer --- he couldn't figure out how to get it open! John commented that: "People who don't get with this technology are dinosaurs and will be weeded out in the end." [Aside: The manager isn't working at Philips anymore. The laptop incident was indicative of his attitude.]

Philips is bullish on the Net. The sky's the limit as more people embrace PC technology.

Helen Thompson Beynon
Manager of New Media, Sprint

Helen calls herself "techno-illiterate." [The rest of us had better quit now!]

Sprint worked on its Internet site for seven months and went live on June 9, 1995 one week before the seminar. Called "Sprint Stop," it was a collaborative effort among Sprint personnel (namely, Helen, who like J. Snyder says she needs more help), about 7-8 people from JW Thompson, 3-4 advertising agency personnel, and 5 programmers. From her experience, Helen advises that you need to get the "brute facts" right versus the subtleties, or sub-titles as she prefers.

Ten years ago Sprint was a rural telephone company. Now in 1995, it is in a position to build several portions of the information superhighway.

FACTS OF LIFE

The Internet is like teenage sex . . . a lot of big talk, great expectations, little experience, and very little skill. And it looks like everyone is doing it . . . except you!

IS everybody doing it? It's hard to tell when even the small look big with a Home Page.

IS anybody who MATTERS to my company doing it? Not my competitors . . . but my consumers!

IS your target market right for this medium?

Nobody has mastered this medium solely for commerce. There's more going on here. Helen's advice:

  1. Survey the field carefully.
  2. Surf the Net for weeks to see which sites work for your competitors and others.
  3. Figure out how you can differentiate your site.
  4. Don't let the technology dictate to you.
  5. Your site should reflect your company's philosophy. Stay focused with emphasis on your essential brand message and personality.

When putting together your site, pick the right partners to help you do it. Do they understand:

  1. your brand?
  2. your marketing plan?
  3. your audience?
  4. your creative needs?
  5. the art of communication?

The objectives for the Sprint site are to:

  1. Build the brand.
  2. Build the business.
  3. Build a customer retention relationship.
  4. Build interactive skills.
  5. Build internal and external PR.

Having a Web site is not narrow advertising, it is fully-rounded marketing. Sprint's strategy: to succeed at invitational marketing that provides a compelling and coherent experience that allows the consumer to control the interaction.

With a Web site you can:

  1. impress (AT&T corporate image)
  2. entertain (SCI-FI channel and others)
  3. help (Sprint's approach)

For its Web site, SPRINT STOP, they decided that a campy, irreverent, '50's graphics approach best depicted the personality of their company. So, "Sparky" greets you and leads the way along the site which creates a helpful service station on the I-Bahn.

Sprint provides different things to different audiences:

  1. Customers = one-stop online service center
  2. Public = lots of feedback to questions
  3. Net Savvy Surfers = communication forums and chat rooms
  4. Newbies = help and information on Net services

At Sprint, they have created an organizational entity called the Interactive Marketing Council which meets once a month for three hours. It brings together marketing people from all their divisions so that they can work together, not duplicate efforts, and also create an internal network to share as they learn. While each Sprint division is developing its own Web site, some of the graphic elements are the same throughout and there is a consistency in the tonality of the content that is brought about by the Council. Now there is one universal Home Page as they get started. They will then move to other Division sites hooked together through hyperlinks.

You have to be enthusiastic or you won't survive the rigors of creating a Web site. It's like advancing past the awkward stage of teenage sex. Doing it takes a huge effort, but the more effort you put into it, the more you get out. Is this all really worth it? Go ahead. Make the earth move! [I guess Helen did because there were 100,000 visitors in the first 6 days after SPRINT STOP opened.]

Anita Schiller
Director of Electronic Marketing, Silicon Graphics, Inc.

Silicon Graphics is a hardware company and found that in terms of the Net and the Web, selling hardware alone doesn't work. They found that partnering with software companies is critical, with software information incorporated on their sites.

Silicon Graphics' Web Implementation
EXTERNAL ACCESS FIREWALL INTERNAL ACCESS
Corporate Responsibility --
Silicon Surf
Silicon Studio		 Silicon Junction
- General Information
Divisions
- products		 Field Offices
- 45 countries
Employees Responsibility --
Reality.com
- personal home pages w/ graphics, etc.		 Special Interest Groups
- technical

Silicon Surf = main corporate site that will have different entry points for different market segments. The Internet is NOT free. There is a huge investment to get a Web site up properly and maintained properly. It's not just a marketing site. It's service, too. It is essential that you add value to your site and put more control into the hands of your customers in deciding on the information they want and need.

Web sites are great for generating leads. On the Silicon Graphics Web site, customers can complete a form called "How Do I Buy" which gathers complete demographic and purchasing information. In the last 90 days, SGI received 1,000 qualified leads through this venue with 20% of the prospects ready to purchase in 30 days with an average budget of $45,000. They don't do the actual sales electronically. They close the sale by personal contact. But this brings about a shorter sales cycle as customers seek instant information = instant gratification. SGI can provide:

  1. Demographics online
  2. Depth of information
  3. Customer application profile
  4. Published articles relevant to their industry
  5. Software Try 'n Buy = customer downloads software & uses it for 30-90 days before they make a purchase decision.

SGI site was launched one year ago with two staff. Their statistics to date:

For SGI, 60% of the users are in the US with the remaining from the rest of the world. Europe is 6-9 months behind the US, but coming up fast. This is definitely a global medium so your message must not be a US-only message. Each country (field) office develops some local content, local language, local contacts with same graphics feel but their own indigenous personality.

Future thoughts:

  1. On-line sales
  2. 3D Content based on VRML - Virtual Reality Markup Language for a 3D Web Browser
  3. Club SGI - sense of community for Silicon Graphics Inc. users
  4. Tiered content - reaching out in different ways to different customers

Things SGI learned along the way:

  1. Develop a consistent look and feel so that published material is consistent with corporate image (create a style guide, templates).
  2. Content owners own the content.
  3. The Web site should not be "run" by the Webmaster as that person doesn't create content.
  4. There is a real need for a Webmaster because customer e-mail can bury you. Who answers it? FAQs can help; but you'll make lots of enemies if you don't respond. You need a rotating staff of Webmasters.
  5. Plan for growth. You need to keep the site fresh. Always think: What's next? What new information can we provide?
  6. Implement version control at the start or you'll drown in obsolete content. Updates are critical.
  7. External sites are sexy, but internal Web sites are great too.
  8. Integrate Web site into your overall marketing mix by adding pointers to it in print advertising, business cards, etc.

SGI discontinued its internal Electronic Marketing Council because it disintegrated into a jam session for Webmasters rather than coordinate corporate marketing. Marketing professionals like to plan one year at a time, but this is too long a horizon time for Webmasters.

Steve Painter
Electronic Commerce Marketing Manager, Digital Equipment

Digital was on the Internet in 1983 predating all current online services. They put up their FTP site in the late '80's followed by a WAIS server and was one of the first to go on the World-Wide Web (WWW) 15 months ago. Digital started with a product line-driven company approach, but found that reengineering was necessary as Digital is principally an industrial (company-to-company) versus retail operation. Not everything can be automated (e.g., contracts) and systems must match the rest of your marketing in that all the messages various parts of the company send out should be consistent and similar. The approach is factual --- no hype or "puff."

There are two types of customers: 1) real buyers and 2) tire kickers. Going onto the Internet you need to orient your materials to the real buyers. It is hard work to build lists and find out what customers want through this medium. In 1995, it is expected that 33% of the $100 million sales for Digital will come electronically, about 10% of that from the Internet. As you move onto the Internet, you begin competing with yourself.

When designing the right business policies and procedures on the Net, Steve suggests you:

  1. Listen to your customers.
  2. Keep things simple.
  3. Define everything mathematically.
  4. Automate everything that makes sense to automate.

When building the infrastructure in terms of technology and security, you should:

  1. Listen to your customers.
  2. Remember the IS infrastructure is your bedrock.
  3. Make systems your reality.
  4. Keep it effective.

When offering your products on the Net, you should:

  1. Sell everything.
  2. Negotiate nothing.
  3. Price as usual.
  4. Promote with facts.

When attempting to seize future opportunities on the Net, you should remember:

  1. Total connectivity.
  2. Electronic tools.
  3. Customer driven order management.
  4. Mass customization by the customer.
  5. Just in time.
  6. Retail.

Digital does take credit cards over the Internet. However, credit card validations are done offline; but if the card clears and the credit limit is large enough, Digital takes it. Given that credit card exposure is only $50 in nearly all 50 states there is minimal risk to the consumer. For the seller, however, security is NOT an option. You have to do it! Digital has "curtain walls upon curtain walls and 'Mother Digital' is in the innermost sanctum." And you need a password to get through each curtain wall. In spite of all that, Digital is actively converting its current large to mid-sized account customers to electronic commerce and offers consulting at a fee to convert a customer's system. The number one driver for this is error reduction thus providing a lower number of cancellations or product order problems. However, the customer decides on whether they go to EDI or not. So far, it has been a blend of online interactive and EDI.

Digital has a huge investment in the Internet because all its customers have computers and are on the Net. With 5,000 products, Digital doesn't pick and choose, but sells everything on the Internet. However, there are no pricing negotiations or discounts done online.

For Digital, business has certainly changed:

YESTERDAY TODAY
  • Proprietary systems
  • Hardware services
  • High margins
  • Long life & build cycles
  • Large backlog
  • High assets & costs
  • Low ROA
  • Standard systems
  • SI services
  • Low margins
  • Short cycles
  • Little or no backlog
  • Low assets & costs
  • High ROA

Steve predicts that the WWW will be the interface of choice, not HTML, and they are working closely with Netscape, Mosaic, Adobe Acrobat, etcetera. They expect that people will come in and build their own systems and products before long. This technology allows for just-in-time manufacturing ... and that is just-around-the-corner.

Iang Jeon
Director of Electronic Marketing, Fidelity Investments

Fidelity has approximately 10-15% of the total NYSE volume with more than $250B assets under management, more than 15M customer accounts, more than 75 US branch offices, five US phone centers, and international operations on five continents.

Fidelity's strategy concerning electronic marketing is:

  1. Develop a new distribution channel.
  2. Leverage content assets.

Fidelity's objectives concerning electronic marketing are:

  1. Meet customers needs and preferences.
  2. Support corporate strategy.
  3. Make routine interactions more cost-efficient.
  4. Leverage and enhance Fidelity's reputation for innovation.

Iang quoted Pattie Seybold from a 1993 article in Computerworld:

"If you're not an active Internet citizen by the mid-1990s, you're likely to be out of business by the year 2000."

Fidelity has been on Prodigy for 3 years and focuses on the individual investor with its "Electronic Channel" which assists marketing activities via regular mail, rep-assisted phone calls, and branch distribution office centers. They use proprietary software for training. But their attitude is that the Internet is not just another advertising channel. Through the Internet, Fidelity is an information provider. Following that theme, based on market research results that 60% of Fidelity customers have PCs at home, they have formed a partnership with AOL and will offer online brokerage soon. Iang reported that there were between 24-30,000 Web servers online as of early 1995. Once the online services have access to the WWW, 7 million users will be added immediately.

Despite all of this, Iang believes that traditional marketing rules still apply on the Net and Web in terms of promotion and image, but the content must be "value-added" and not just selling copy. Thus, Fidelity has incorporated "hot spots" into their header graphic so the electronic package is visually appealing while still being functional. For Fidelity, this means creating "interactive content" based on "what-if" scenarios for customers financial planning projections.

Iang noted that the Web server is completely separate from any internal Fidelity Web server as security is critical. Internal support and maintenance is important not just for your e-mail performance, but for security reasons as well.

Given that none of this existed two years ago, don't expect to plan anything ... just be ready to learn. Just because you're on the Internet doesn't mean anybody knows or cares. You need to get pointers going to your site via promotions, press conferences, PR, contests, etc. plus traditional advertising pointers to the electronic media. This is not just a technical exercise, it needs to become a part of your overall marketing mix. Using interactive surveys online you can get customer profile information to match with appropriate products. Concern should be on providing content and not focusing on the technology. First, provide general relevant information before introducing the product.

Fidelity Internet demographics based on 5,000 entries to a "Guess The Dow" contest that ran for 2.5 months: 86% male; 75% under 44; high income.

Karen Shapiro
Vice President, Interactive Product Online Delivery, Bank of America

Karen quoted a recent SRI survey reporting that 50% of Internet users are highly educated professionals with an average income of $75,000.

BOA is in the process of building a full-service financial institution in cyberspace with only one single WWW presence (even subsidiaries will be incorporated). At the moment, less than 1% of the population does home banking. BOA believes that home banking is one the Internet's killer apps and consider it a serious alternative service delivery channel.

Thus, BOA formed an Interactive Banking Division to develop a presence on the Internet that allows for a lot of cross-selling and has just purchased Nation's Bank Managing Your Money software (competitor to Quicken) to create a link between the Internet and PC software for bookkeeping and accounting. They consider this an investment in the future, but are already getting real business in the home loan area with requests coming in online and call backs are made "in-person".

The BOA has decided to define a mid-range program concerning the Internet that focuses on "extending the brand." In drafting their blueprint for their presence on the Net, BOA considers a Home Page like the "front door" to their Web site. Is it open? Closed? Like a front porch? What you put on your Home Page sets the stage and the tone for your entire site. Given that, you need to decide:

  1. How much for a pretty face?
  2. How frequently do you change your content? [BOA updates weekly.]
  3. What skill sets are required?

How will customers find your Home Page?

  1. Access ramps:
  2. How are they getting on?
  3. Directories: Online & offline listings
  4. Online advertising: Where will you put your logo?
  5. Offline advertising: Integrated media plans
  6. Don't venture into unfriendly territory.
  7. Involuntary links: How much control do you have?

How will you attract customers?

  1. Novelty: word of mouth and press coverage
  2. Malls: physical location on the Net
  3. Conceptual proximity: mental location and links
  4. Magnets: deep content
  5. Killer applications: functional, needed repeatedly

An interesting aside from Karen: "The best content for this medium has yet to be invented."

Steve Lake
Senior Vice President, Consumer Markets, Reuters NewMedia

Reuters NewMedia has not really become a WWW publisher in its own right. Rather than sell information to the public-at-large, NewMedia will sell fresh content to other publishers on the WWW. Thus, they approach the Internet as other companies who are selling business-to-business, but their "product" is content. Steve reported these Internet demographics: 80-90% male; 16-49 in age; good education.

Before making the decision to sell fresh content to others, NewMedia went through a thorough analysis of what it would take to become a WWW publisher.

The areas of analysis are:

1. Publishing Tools

Browsers: Director, Acrobat
Authoring Tools/Page
Description Languages
- SGML
- HTML
- VRML
- JAVA (SUN product, small package uploaded from a server to a browser to handle such applications as real-time spreadsheets and animation)
Server Software
Functions:
  • publishing
  • merchant
  • commerce
Legacy Systems
Existing systems that stand alone, do not have any relationship with the WWW.

2. Meeting a Need

What need are you meeting? Just as there are key attributes to any successful product, good Web sites will have those same attributes.
Corporate Information [Home Page]
Product Information
Information Service
Trading Community
Shopping
Entertainment
What market are you serving? In the electronic market, you need:
Timely marketing information
Contributed information that adds value
Analytics and decision tools for users
Transaction mechanism

3. Creating Compelling Content

NewMedia is experimenting with a multimedia daily newspaper that will encompass text/rich text, graphics, photographs, animation, audio, and video. So far, they have learned that you should avoid video and too much text. Their success to date has been by spacing bold text with embedded audio and compelling pictures/animation. And you always need the value-added feature of links to other sites and/or embedded external content (eg, news which Reuters provides other WWW publishers).

You need to be sure you have the resources to update your content on a frequent basis. If the material is daily than people will seek it out on the Net. If it's only weekly or less frequent then it should be sent via e-mail because people won't remember to go to a Web site. This would be the reference for periodicals in Steve's opinion.

4. New Media Business Model

New models are needed because the old ones do not work. Steve feels that the business model will change from that of "print" to "broadcast." It will be more like buying TV spots than a space ad. There will be "free" content which is advertiser- supported more than pay-for-view.

5. New Organizational Forms

Multidisciplinary teams will be needed to make this work, akin to cell manufacturing on a factory automation floor. For example, a cell would comprise a journalist, a multimedia programmer, and an educational specialist. New skill sets will be required by staff. They will need to understand and become competent in the areas of: spatial design as this is a highly visual environment; multimedia authoring tools; and managing the relationship between technology and artistic disciplines.

6. New Media Distribution

How do you increase site traffic?
leverage sister print publications
advertising
reviews
Internet Yellow & White Pages
cooperative publishing (linking content from various publishers)
create communities
get embedded into a browser (this means $$$)

Steve akins "value site traffic" to voodoo economics as there isn't any "Nielsen" ratings for the Internet, although IPRO & Digital Planet are two companies making attempts to measure hits, track users, and register users. But traffic systems really do not yet exist.

7. Getting Paid

NewMedia is preparing to accept payment via:
fax/telephone
First Virtual
Cybercash
Mondex (a trial funds transfer going on in the UK)

Ed Sanden
Vice President, Interactive Services, CUC International

CUC International is a membership-based consumer services company that was started in the early 1980s completely on venture capital and went public in 1983. In 1995, it will do $1B in sales. They make their money on their members' renewals. [Sound familiar?]

Their typical renewal rate for Year 1 is 70% and it increases after that.

CUC believes that the concept of empowering the consumer is essential for success. They have built up their shopping service based on giving the consumer product direct from the factory with no markup. Using a sophisticated mainframe system, they match supply with demand, track consumer preferences, and make money with their annual membership fee. They "provide value and information through savings and convenience." Their focus is to deliver value to the consumer and have 6,000 people at terminals just gathering data for consumers. They have built up reliable systems and human expertise over the last 20 years and will continue to do so.

Looking at AOL which has 3 million subscribers now and is anticipated to have 5 million by the end of 1995, CUC believes that it is the juggernaut of the business. According to Ed, "the Web is both a blessing and a curse." CUC acquired NetMarket which processed the first "secure" payment transaction on the Internet. They are also experimenting with Digital Image Labeling, SmartClerk (customer profile system), and Virtual Mom (a date reminder).

Steve Painter
Electronic Commerce Marketing Manager, Digital Equipment

Digital's Experience with the Net

Digital reorganized its sales rewards, price files, customer files, and order management to be a part of electronic commerce. The technology was tough at first, but in the long run, it's the people that bog you down. Digital's experience has been that when you add a new sales channel, you need to create a way to give the sales reps their credit/rewards.

Digital's Strategy is One Store Front - Many Paths

You need to remember that for order processing the process is a closed loop. You only do each step ONCE. The infrastructure of your information system is your bedrock. Start small and build on a solid base. Modules and object-oriented process servers are imperative. Digital now buys more industry-standard module software rather than engineering their own as they did in the past. When starting out in electronic commerce, you need to decide whether to go with a proprietary versus an open-standard system. Your decision depends on your company's mission, customers, staff, and sophistication of word processing and other software already installed.

Randall Whiting
Manager of Electronic Commerce, Hewlett Packard

Randall chairs the Electronic Marketing Council at HP and is a jazz musician in a band called Cross Currents. He believes that a staffer with a library science background and a content-display coder (programmer) are essential members of the electronic commerce team. "In the beginning, we didn't even know how little we knew about this Internet and WWW technology."

HP strongly supports CommerceNet, a not-for-profit corporation started 18 months ago by Enterprise Integration Technologies in CA along with HP, the other large computer companies, and local CA banks. The payoff is getting the Internet to support business-to-business transactions and relationships that are enormously complex and nested from large to medium to smaller players simultaneously. This is not a one-time deal, but rather a movement as one deal is closed you then go on to more things. These are beyond the limits of credit cards, but rather the transferring of invoices and EDI as well as integrating it all into "back room" (e.g., accounting) processing. Staff at HP often serve as consultants to their customers to make this happen.

The HP Web server currently receives 175,000 hits per day with 30% coming from outside the US. Their foreign offices and customers want information personalized to the country level. The problem is that products and/or prices are different from country to country and by providing complete information on the Net you can create a gray market as customers compare prices around the world. Plus you need to create a two-way communication with your customers.

Electronic Commerce = A global electronic marketplace which allows all members of the value chain to interact for mutual commercial success.

Members of the value chain for business-to-business electronic commerce:

Electronic Commerce Applications:

In 1995, 75% of HP customers worldwide have high-speed Internet connections, but it's not necessarily at the desktop of the people who buy, or pay for, HP products.

Commercial limitations of the Internet:

HP has mounted 100,000 pages of content on its Web site over the past 18 months and refreshes about 30-40% of that content on a fairly frequent basis. They believe that there is the need to give the customer the tools to access those 100,000 pages in a reasonably customized manner. As Randall admits, this is not easy to do.

What it Takes to Succeed

  1. New business models are necessary.
  2. New business processes to take orders must be developed.
  3. New skills must be developed as marketing and information systems people work together.
  4. Attention and support must be given to core technologies and infrastructure.
  5. Standards and best practices must be developed and used.

Marketing people must be thinking about non-traditional media. There is a dire need for good new production tools. Desktop publishing tools to meet the Net's demand for large amounts of information just aren't out there yet.

HP believes that CommerceNet's Industry Working Groups can lead the way in the areas of:

How to obtain CommerceNet membership information: email = info@commerce.net

Gail Grant
Vice President, New Business Development, Open Market

First, we need to solve the problem of trust. Security is essential, but we need to think beyond credit cards. Credit cards are only the first step because of the risk carried by the banks. The lack of security compounds that risk. California is the first in its attempt to pass a digital signatures law.

User names and passwords are not authentication, they are just identification.

And remember, be nice to your system manager ... that person can read ANY file.

The real key is message integrity which provides the security you want for any information [including articles, etcetera].

The Internet is a global village and there are no good ("safe") neighborhoods, a thief can be right next door. Therefore, in terms of security, Gail spoke about "degrees of paranoia" those being:

0 = Zero degree = Alice in Wonderland = "You mean, someone would do something illegal on the Net?"

1 = First degree = Open Market/First Virtual = Take credit cards, but OFFLINE.

2 = Second degree = Encrypt everything!

3 = Third degree = If the system is compromised, encryption allows a thief to steal in private; the fraud is internal.

Challenge/Response devices provide security with each card having a unique key. Digital Pathways [changed its name to AssureNet Pathways] and Secure ID are two companies that manufacture such devices.

S/Key by Bellcore suggested as industry standard as it is based on one-time passwords. Use once than throw away.

Message Integrity is addressed by companies such as Checksums and Message Hashing. Remember that not all solutions work through firewalls.

Another problem with the Internet is the lack of international law. This is a challenge to international authentication. And what about restricted and embargoed countries? Not to mention another 10,000 individuals or so who are blocked from "trade" (read = transfer of information) with the U.S. or other countries? Encryptographic solutions called negotiations are needed between countries.

Currently there are two standards dealing with security on the Net (and, of course, they are not compatible!):

SSL = security for Netscape browsers; encrypt stream of data (cuts hole in firewall however so you can not authenticate buyer).

Secure HTTP = each packet is protected; has its own "key ring."

There is a real benefit to be gained in the area of customer relations because of your ability to personalize information and it is all done by automation. You can cut down on customer service by allowing customers to answer their own questions through interaction with your files/Web site. However, your customer service calls can increase if you have a poor interface.

The Internet can be a powerful market research tool. Even lost sales provide an opportunity. If you install a search program that stores what your customer could NOT find, you have the seed for new product development.

Dick Lonergan
Executive Vice President, Point of Transaction, Visa International

Dick believes that electronic commerce today is a remedial activity as you need to re-educate companies and customers.

How do you get paid? The easiest and most convenient emerging method is the use of either a credit or purchasing card. VISA is already using the current online services and moved $200 million last year, exclusive of membership fees. SIMBA made $20 million on soft consumer goods via the Internet in 1994.

Dick provided some very interesting statistics on the relative market size of electronic shopping for 1994 [figures are inclusive, start at bottom and add up]:

Retail $1.5 trillion
Catalog $53 billion 3% of retail
TV Home $2.5 billion 5% of catalog
On-line $200 million 8% of TV
Internet $20 million 10% of on-line

When Interchange Online and the Microsoft Network go live late in 1995, they will add 10-15 million more people to the Internet.

Dick's group is creating "VisaNet" which will "brand bits" (a la Nicholas Negroponte in "Being Digital"). VISA needs to create a "virtual" decal for merchants and customers to bring about authentication. In this area, at the moment, there is an "open standard." That is no one manufacturer has control over the standard. Dick is concerned because it's not always the best one that wins in this case. It's the one that the market wants.

Dick closed by encouraging everyone to think about new strategic alliances. One example is the 12 largest newspaper chains in the US coming together to create the New Century Network.

VISA has two new alliances:

Panel Session on Security Systems
Allan Schiffman, Chief Technology Officer, Terisa Systems
Hans Von Braun, President, BBS Systems
Mack Hicks, Vice President, Security Systems Design, Bank of America

Allan began with a warning that on the Internet who don't know who is going to be handling your data, not just day-to-day, but bit-by-bit! In terms of security, consumers need to be concerned about how to protect the privacy of their own data and protect its intellectual property rights. To date, each security issue has been "solved" or "accomplished" by a different system --- security is not ubiquitous. There is no single solution to all security interests or problems because there are too many differences amongst them all.

When thinking about risks, Allan's advice is to remember:

Hans encourages a complete evaluation of your software and computer systems in terms of security and believes that there should be the same level of security on the Internet as you have had in your data systems environment.

He then outlined the three government security classifications: C2 UNIX, B1 UNIX, and B2 UNIX. B2 is the highest level of security which the Pentagon is testing with the Harris Company creating the software firewall and secure hardware. B1 is implemented by both hardware and software companies, but you need to turn the security on manually (it is not automatic) and it takes a long time to get implemented.

To get our attention, Mack reported the statistic that in 1993, credit card fraud cost the US consumer a total of $400 million. Even with the best of intentions, security is not always possible. Anecdote: A correlation has been substantiated between washing your hands and reducing your likelihood of getting a cold. However, just because you wash your hands four times a day does not mean that you will NEVER get a cold.

Mack believes that the price of security solutions should be broken down into two parts: 1) the cost of the system itself, and 2) the overhead for ongoing administration of the system. The latter can be as much, if not more than, the former.

In the old days of international commerce, how did you trust each other? A letter of credit went between banks and was a completely paper-based mechanism. Now the Bank of America is going to try to make this electronic.

What is happening with security for wireless data communication (broadcast)?

As you look at your security needs, the panel recommends that you get your company's internal audit department involved in creating security systems that are effective and supported by company policy. There is the fundamental issue to resolve: Would you delegate your own personal safety completely to a bodyguard? You can not ignore your own internal computer security. All agreed that no security system is rock solid or air tight because when they are they are so clumsy that they never get implemented. Most companies stock in trade is customer trust, but the networks are so untrustworthy that it's hard to know whether you should prosecute a breach or not. Allan prophesied that "nobody will really worry about security on the Internet until someone gets hurt."

Jeffrey Ritter, Esq.
Program Director, Eclips, Ohio Supercomputer Center

Jeffrey is also CEO of ORNET, part of the Internet with 175 commercial sites including such organizations as Procter & Gamble, OCLC, and Chemical Abstracts Services

The Internet is a scary shaky dangerous place for commercial data. There are bad guys out there who take your data, not to use it, but because it's fun to take it. They're like graffiti artists. They can do this because there is an absence of a legal mechanism.

In spite of all that, however, the Internet is where commerce is going to happen. A company starting out electronic commerce can become the law(maker) of the deal:

We need to take the initiative to ask questions and make business decisions in order to make the "laws of the deal." Laws of the Deal are for the first time being made all at once globally. Existing laws are not enough so you get to write the rules! Operating in a global market means you are dealing with the equivalent to 167 different sets of laws (one set per country). The Net is forcing us to confront the differences among national cultures and the diversity of laws, etcetera.

Jeff considers EDI like virtual sex. It's just as good as the real thing but without paper.

Electronic commerce rules are different for the trading of goods versus electronic intellectual property. The difference of atoms and bits as Negroponte points out.

Mailbox Rule: Contract is valid even if the order is not received. In the electronic world, this can be overrided. Electronic commerce is compressing our time frames incredibly. What would take days or weeks in the past now takes hours and thus, creates new risks. People assume that just because it's electronic it's confidential. That's wrong and it must be spelled out explicitly. You can park them on the back page of your Web site to explain how you do business.

We do not have principles of privacy for corporate data and these are badly needed. When using value-added networks there are no legal precedents to fall back on. There is a slow commercial acceptance of trading partner agreements. Europeans have said that if you use EDI you shall have a trading agreement. So, data policy is becoming a subset of trade policy. The United Nations Commission on International Trade Law has adopted a model law of the deal when using EDI and electronic trading agreements.

In Africa and Eastern Europe, there are trends to have even more paper-based trading agreements because this allows governments to create employment, not take it away. Europe now has seven different prototypes for the acceptance of an EDI invoice. Unlike the free enterprise system in the US, in other countries, commercial enterprises can only exercise transactions under the rules of their government. Thus, they can not change their method of invoicing until their governments say they can. In the US, the IRS 91-59 is the first step to integration of the government with commerce in terms of audits and regulatory action because there is the need on the Net.

There are more barriers and complexities in the electronic world, not less. The use of technologies still requires production of compliant records. Jeff advises that the management and marketing staff control the law of the deal as "your lawyers don't understand any of this yet."

Finally, make your data valuable. Enhance your data through quality control. The Web and the Net are taking out intermediaries who transfer information in an entire range of industries. These intermediaries are challenged to add value to the transaction. [Sounds like librarians and publishers might be some of those intermediaries!]

The End

For more information or discussion about the seminar, contact Barbara Meyers via postal mail, phone, fax, or e-mail. Meyers Consulting Services, 1836 Metzerott Road, Ste. 1003, Adelphi, MD 20783-3448, USA, Voice: 301-434-6249, Fax: 301-434-0126, E-mail: 5526378@mcimail.com

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