Government Lags Business In Electronic Commerce

Government Lags Business In Electronic Commerce

By Ed McKenna
Contributing Writer

Online commerce is projected to surge over the next five years as the Internet surpasses the personal computer as the chief driver of the information technology market, according to analysts at one research firm.

Business-to-business sales over the Internet involving medium and large companies are expected to generate the largest amount of online sales, totaling just over $4 billion this year and almost $100 billion in 2001, said John Gantz, senior vice president at International Data Corp., Framingham, Mass. The home consumer market follows with $3.9 billion this year and almost $46 billion in 2001.

Lumped together by IDC, the education and government sectors are expected to yield $1.2 billion in online sales this year and $27.7 billion in 2001. The lion's share of that total, however, is from education with the government portion pegged at about 1 percent of Internet sales this year and 4 percent in 2001, said Gantz. The latter figure could be larger depending upon how quickly the government adopts the Internet for services such as selling licenses, he added.

IDC officials released their research at a recent Internet '98 briefing in San Francisco.

The government sector did score above average in a survey conducted by IDC to gauge awareness of the Internet, with 34 percent of government respondents recognizing the importance of Internet to their organization.

"The average across industries was 29 percent," noted Frank Gens, senior vice president for Internet research at IDC. The education sector scored the highest with 45 percent, while the health care sector placed last at 12 percent.

Propelling the increase in online commerce is the equally impressive growth of the Internet. Surpassing 50 million users this fall, the number of Internet users is expected to reach 60 million at the end of this year and 175 million in 2001 on its way to 1 billion in 10 years, said Gens. "By the end of the year, about 30 percent of the installed base of PCs and network computers will be attached to the Internet," Gantz said, noting that 61 percent will be attached to the World Wide Web by 2001.

"It's pretty clear that the Internet is replacing the PC as the engine of growth," he concluded, noting that last year the Internet accounted for about a $19 billion market.

"It's a small part of the $630 billion IT market, but pretty impressive for effectively a two-year-old market segment," he said. Gantz predicted that the Internet would be a $92 billion market by 2000.

It is the beginning of the second wave of IT product development, including the network computer and services, servers and software to help build things on the Internet infrastructure, Gens said. Network equipment, Internet access and the PC itself represented the first wave, according to IDC. But now "NCs are on a trajectory to leapfrog annual PC unit shipments by 2005," said Gens. The gap between the PC and NC "is not closing on revenues as quickly for obvious reasons - the NCs are a lower price point, particularly the home units."

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