Business, consumers, and techies are grappling with the Net's perils

THE DIGITAL BAZAAR Click for June 22, 1998 issue

Business, consumers, and techies are grappling with the Net's perils
Companies are tearing up the track in the race to realize Internet-based electronic commerce. That's fine. Fortune will certainly favor the swift. But it pays to consider some of the yellow flags that have flashed along the roadway--and others that will be spotted before long.

The Net already feels jammed at times, even though E-commerce is still in its infancy. And there are other obstacles. Technical standards remain to be worked out. Security is much on executives' minds. And there are cultural questions that cut to the core of how people choose to amuse themselves. How many after-work hours will ordinary consumers be willing to spend shopping online? The Net has already demonstrated a capacity to correct its own errors. E-commerce will certainly not be derailed. But there will be jolts and delays along the way.

Congestion is the most obvious challenge. By the year 2000, the number of devices equipped to tap into the far-flung Info Highway will shoot to 233 million, up from 16 million in 1995, according to market researcher International Data Corp. (IDC). Nearly 46 million people will be buying goods and services over the Net, up from 4 million who do so now. A decade after that, IDC envisions 1 billion wired consumers--with Net links to countless information appliances in the home, from smart TV-set-top boxes to refrigerators that alert the service shop when they need repair.

REROUTING TRAFFIC. Yet congestion is mainly a technical problem--exactly the kind of thing smart engineers can finesse. They're already handing out fast cable and digital-phone modems to consumers who are cursing slow 28.8-kilobit Internet access. Businesses also will learn to avoid logjams on the Web by using backup computer servers and by routing some types of traffic at odd hours or along less-traveled pathways. Through such steps, companies can probably cope with ''flash crowds,'' which IBM researcher Steve R. White expects to occur as more businesses mount widely publicized online sales and other events.

Security and privacy are knottier problems. Today, Net security is practically a contradiction in terms, says Jack Danahy, director of security services at GTE Internetworking Services. ''The Internet is a medium developed to provide wide access to information,'' he points out. ''But security means being able to restrict access selectively.''

Worried about hackers and internal snoops, your network managers probably seal off access to certain areas of the company using ''fire walls'' and other techniques. But open Internet standards weren't designed with such secrecy in mind. And when companies take ad hoc measures, they wind up sporting a host of incompatible software systems, making communications more cumbersome. Here again, the techies will probably rescue us. Security is a hot research pursuit in Silicon Valley and in dozens of academic computer-science labs.

This is not to suggest that business managers can sit back and wait for the gear heads to cook up all the necessary fixes.

E-commerce is too critical to be left under the stewardship of any one group. Besides, not all the solutions can be digitally crafted. Academics and engineers will have a hard time resolving issues about personal privacy, which are more social than technical. Information wants to be free, we are repeatedly informed by the rapt disciples of Internet bard John Perry Barlow. But whose information do they mean? The growth crime of the new millennium, according to Net-savvy crimefighters, is a sinister offense called ''identity theft,'' in which crooks sniff out your Social Security number and a few other stray bits of data, then assume your identity and acquire credit cards and bank loans in your name. Not exactly what Barlow had in mind.

Should we forbid companies to stockpile personal data on individuals? Probably not. Enforcing such a ban would be nearly impossible. And if it were imposed, it would present an entirely different kind of threat to E-commerce. Internet businesses have had a hard time dreaming up models for revenue streams that can actually deliver profits. One of the most promising business approaches involves tracking people's preferences online and tailoring products to those users, or else selling the information to others who wish to do so. Throttling the flow of data--if it's even possible--would shut off one of the most promising Net-based business opportunities.

CLEAR LABELS. Fortunately, there are less radical solutions. Indeed, like a living organism, the Net has already spawned features that may thwart the worst privacy abuses. The model here may be TRUSTe, a body created by the Electronic Frontier Foundation to make clear how different Web sites deal with user privacy. The purpose is not to prevent sites from tracking visitors' explorations. The group audits Web sites, and then permits them to display so-called Trustmarks that clearly identify each site's privacy policies, so that Net users will be able to make informed decisions.

In the same ad hoc fashion, groups of tech-savvy businesspeople hope to resolve the most rancorous debates over technical protocols. Right now, the lack of common standards threatens E-commerce in several ways. Thousands of corporations, for example, are automating their manufacturing, shipping, and warehouse activities by installing sweeping enterprise programs from the likes of Oracle (ORCL), SAP, and PeopleSoft (PSFT). These programs don't swap data with one another easily. And neither do the companies that install them.

Where ad hoc associations can't tread--deep inside corporate board rooms--pressure to become more efficient may be the best safeguard against threats to E-commerce. Many companies, for example, show worrisome signs of transporting bad business practices directly onto the Net. Gartner Group (GART) Vice-President Vinnie Mirchandani has a favorite example of this. Even when dealing with trusted suppliers, he says, manufacturers often require repeated checking of purchase, shipping, and receiving documents to make certain they match. Typically, each such match may cost the company $150 in labor, tools, and reviews before the purchase order gets issued. Freewheeling Internet communications offer a means of slashing this redundancy--but businesses aren't taking advantage of it. ''Companies simply don't trust their suppliers,'' complains Mirchandani.

Well, they must learn to, and they will. In the 1980s, companies rushed to reengineer flawed business practices, spurred by nothing more than the need to compete more effectively in a global economy. If Net-based businesses don't tear up old approaches to orders and inventories, they'll soon find that competitors who did so are racing past them. Learning, in the end, is what this whole business is all about.

By Neil Gross & Ira Sager


TABLE: Yellow Flags for E-Commerce

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