BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
BUSINESS WEEK E.BIZ -- CUTTING EDGE

Look, Ma, No Humans
More and more, e-commerce entails machines just dealing with machines

Just a few weeks ago, I argued that way too many Web site operators forget they need to forge solid relationships with people--flesh-and-blood customers and partners. But a few years from now, it's quite possible that the bulk of electronic commerce won't be conducted between people at all. Strange as it sounds, most transactions will be carried out completely by machines, from computers and industrial sensors to software agents and household appliances.

Already, we're seeing the beginnings of a world in which computers, after just a nudge from people, have a merry old time doing business with one another. On auctioneer eBay Inc.'s ( EBAY) Web site, for instance, you can enter a ''proxy bid'' that does battle automatically with other bidders up to your chosen high price, even while you sleep. Likewise, the Web exchange Arbinet Communications Inc. allows telecom companies to set loose automated buy or sell orders for excess calling time at set prices and quality.

As chip-size computers and cheap bandwidth spur constant Net connections to all manner of devices, machines could even become the prime customers online. ''You have a situation where people don't have to be involved,'' says David Roddy, vice-president for Internet economics at the industrial trading site VerticalNet Inc. ( VERT) ''My refrigerator can talk to my grocer about the lack of milk. My car can talk to my mechanic about a funny noise. The mailbox will tell FedEx whether it's empty or full.''

I can see this going even further. Production equipment at a company's factories in various cities could have sensors connected to its resource-planning software and to its suppliers' inventory databases, as well as to e-tailers' Web sites. Once the customer clicks the ''buy'' button, machines could take over from there, handling purchase orders, replenishing raw materials, and ordering replacement parts for ailing factory-floor machines. Eventually, supply chains could shrink to seamless links, controlled directly by the ultimate buyer--even you and me.

In case you think this is all pie in the sky, consider what Eastman Chemical Co. ( EMN) is doing already. Using software from webMethods Inc. ( WEBM), it's starting to allow purchase orders and quality reports to flow directly, with no human intervention, from its pulp supplier, Rayonier Inc. ( RYN), to customer Albemarle Corp. ( ALB), a specialty chemicals firm. ''We don't need to have human beings in the middle of routine transactions,'' says Fred Buehler, Eastman's director of e-business. He reckons Eastman ultimately could reduce its inventories, which totaled $485 million last year, by as much as 15%. Eventually, he envisions telemetry devices on customers' chemical-processing tanks that issue orders for needed materials directly to Eastman's computers, or to its suppliers' machines.

The reason Eastman can't go that far yet, though, points up the big obstacle to widespread machine-to-machine e-commerce. And it's not the machines. It's bullheaded humans. They're still tussling over key software standards such as XML, a universal language for computers to share information. And many adamantly resist tearing down some of the walls they've set up to protect themselves from customers, suppliers, and potential competitors.

Of course, there are plenty of jobs only people can do. We just have much better things to do than such mundane tasks as re-keying purchase orders. Our roles will be at the very edges of business processes--setting up the right rules, fixing the occasional exceptions, and reaping the results. Leaving the rest to the machines, says Eastman Program Manager Bill Graham, ''frees people up to do more creative things.'' And when you get down to it, isn't that really the point of e-commerce?

By ROBERT D. HOF, rob_hof@ebiz.businessweek.com

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