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by:
Jack M. Nilles
JALA International, Inc.
Los Angeles and Bonn, November 1999
Contact:
Gesellschaft für Kommunikations- und Technologieforschung mbH, Oxfordstr. 2, D-53111 Bonn
Tel.: (+49 02 2) 9 85 30-0, Fax: (+49 02 28) 9 85 30-12, Email: info@empirica.com, http://www.empirica.com, http://www.ecatt.com, Contact: Werner B. Korte
Table of Contents: 
Contents
1.1 The US Context
1.1.1 ICT penetration
1.1.2 Major policy initiatives
1.2 Electronic commerce
1.2.1 Business to business
1.2.2 Business to consumer
1.2.3 Barriers and constraints
1.2.4 Future developments
1.3 New ways to work
1.3.1 Barriers and constraints
1.3.2 Future developments
1.4 Diffusion enhancement measures and prospect
1.4.1 The policy bac
1.4.2 Conclusions
1.5 Recommendations
2 Introduction
3 Electronic Commerce
3.1 Forms of e-commerce
3.2 History and the current situation in the USA
3.2.1 Business to business
a) Lower purchasing costs
b) Inventory rationalization
c) Lower cycle times
d) More effective customer service
e) Lower sales and marketing costs
f) Market expansion
g) Channel rationalization: the infomediaries
3.2.2 Business to consumer
3.3 E-commerce evolutionary patterns
3.3.1 Start-ups: new approaches for old situations
3.3.4 Inventing new businesses
3.4 Barriers and constraints
3.4.1 Technology problems
3.4.2 Financial issues
3.4.3 Legal and regulatory issues
3.4.4 Market access issues
3.5 Future developments
3.5.1 Growth patterns
3.5.2 Technological keys
a) Micropayments
b) Security
c) XML standards
3.5.3 Effects on the business processes
3.5.4 Distribution versus Fulfillment
4 New Ways to Work
4.1 New work forms
4.2 Organization Forms
4.2.1 Network Organizations
4.2.2 Evanescent Organizations
4.2.3 Virtual Organizations
4.3 The situation in the USA
4.3.1 Some telework history
4.4 Forces for change
4.4.1 The information economy
4.4.2 Information and Communication Technology
4.4.3 Competition
4.4.4 Traffic and the environment
4.5 The Business Imperatives
4.6 Who is doing it
4.7 Barriers and constraints
4.7.1 Cultural barriers
4.7.2 Technology constraints
4.8 Future developments
5 Diffusion Enhancement Measures and Prospects
5.1 The Policy Background
5.1.1 National
5.1.2 State, regional and local
5.2 Conclusions
5.2.1 General
5.2.2 e-commerce
5.2.3 New ways to work
5.3 Recommendations
5.3.1 Awareness raising
5.3.2 Education
5.3.3 Pilot programmes
5.3.4 Standards
5.3.5 Telecommunications policy and pricing
5.3.6 Incentives
This report covers the current status and likely future developments of electronic commerce (e-commerce) and telework trends in the United States. Associated with the report is a set of five case studies of firms involved in e-commerce and another five organizations that have telework programs.
1.1 The US Context
The United States is currently the world leader in both electronic commerce and new ways to work. It has generally been conceded to be years ahead of the rest of the world in innovation and adoption of these initiatives, although the gap is closing. The electronics and computer industry in the US has been by far the fastest growing component of the US GDP for decades. Much of this growth is the result of a combination of high levels of education and a pervasive risk-taking attitude in both business and government.
1.1.1 ICT penetration
Ever since personal computers were first produced commercially in the US in 1975, annual growth in the industry has been in the double digits. By 1998 94.1% of US households had telephone service, 42.1% (43 million) had computers, and 26.2% (27 million) had Internet access, according to the US Census Bureau. The annual growth rate in households with computers was 15% and the growth rate in household Internet use was 41%. Businesses of all sizes have exceeded households in their use of ICT throughout that period.
1.1.2 Major policy initiatives
Government at all levels in the US-federal, state, regional, and local-have generally adopted a laissez faire attitude toward both e-commerce and new ways to work. The underlying philosophy is that, since the implementation of both e-commerce and new ways to work are primarily market driven, the government should generally eschew interference in the process, except where the market fails to act in the best interests of the public. The primary initiatives affecting these have been:
1.2 Electronic commerce
The United States is currently the world's largest developer of both e-commerce and telework programs, both of which depend increasingly on the Internet as a primary communications link.
1.2.1 Business to business
There are two main forms of e-commerce: business-to-business and business-to-consumer. The business-to-business variety was the original form, and remains the dominant one. E-commerce began in the US as a means for reducing the costs and improving the effectiveness of transactions between large manufacturing companies and their suppliers.
By 1998 more than 1.2 million jobs were Internet-related in the US, with roughly 40% or more of medium to large sized organizations having one or more modes of electronic interaction with suppliers and/or customers. Average large corporation investment in web advertising was 667000 euros. Small businesses were not far behind, except in the fraction with web sites (10% versus 68% for larger businesses). Among the 58,000 medium and large firms involved in e-commerce, 11,000 were firms with at least 500 employees.
According to the Center for Research in Electronic Commerce at the University of Texas, 1998 Internet-based revenues in the US were 95.2 billion euros. Forrester Research, Inc. claims a lower total of 66.3 billion euros. Of that amount, 7.5 billion euros were for Internet retail (that is, business to consumer) transactions, with 18.5 billion euros for business to business services and the remaining 40.3 billion for goods. The Forrester estimate is that e-commerce will reach a total of 1.55 trillion euros in 2003, 1.45 trillion of which will be in business to business e-commerce.
The key motivators for business to business e-commerce are:
The result of these drives, to the extent that they are satisfied by e-commerce, has begun to produce some major changes in US industry. As one example, Dell Computers has grown from the campus business of a University of Texas student to a powerhouse leading the personal computer industry in sales volume to both businesses and consumers. Furthermore, new variants of traditional intermediary firms are developing-the infomediaries-to supplant the role of wholesalers. While a relatively small fraction of commercial transactions in 1999, e-commerce is expected to grow to constitute a major share of all commerce in the next decade.
1.2.2 Business to consumer
Although business to consumer e-commerce tends to get the most press coverage in the US, with firms such as amazon.com leading the way, its sales totals lag far behind business to business e-commerce, and will probably continue to do so. Still, such innovations as online stock trading and auctions have produced major changes in traditional industries. Although at one extreme pundits predict the doom of the brick-and-mortar store, as even grocery suppliers go online, the reality is likely to be some balance between "feel the goods" shopping and the electronic version. As turned out to be the case with the Minitel system, the largest segment of the business to consumer e-commerce market may be pornography.
1.2.3 Barriers and constraints
The primary barriers to the growth of e-commerce are:
1.2.4 Future developments
Although the details vary, estimates by various market researchers forecast a growth in e-commerce values by a factor of about 16 between 1998 and 2002-roughly doubling annually. Many of the technological barriers to e-commerce will be eliminated or substantially reduced by 2003 although elimination of the psychological barriers will take longer.
One key to this growth, at least for business to consumer e-commerce, may be the broad acceptance of a system for micro-payments on the Internet among the several current contenders. Related to that is the practical solution of the security and authentication issues; solution of these two problems will go a long way to increasing the rate of acceptance of e-commerce.
E-commerce promises to materially change the way many businesses operate, moving the focus from emphasis on production details to consumer orientation. It also will affect the location of the brick and mortar assets of businesses, moving from local to regional distribution centers.
1.3 New ways to work
Most variants of new ways to work in the US involve some form of telework, either on a local or regional to global scale. Beginning in a formal way in the early 1970s, telework has grown to the point where 22% of the US workforce is expected to be regularly engaged in some form of telework by the end of 2003, with about 21 million teleworkers, most of them telecommuters, by the end of 1999, according to our estimates. There are four main variants of teleworking: telecommuting; intra-organizational teleworking; inter-organizational teleworking; and teleservices. These variants can be applied to traditional organizational forms and can also enable new forms such as network, evanescent, and virtual organizations.
Like e-commerce, the rise of telework is the natural consequence of a number of other general trends in the world. In the case of telework, these trends are the growth of the information economy; the rapid pace of development of telecommunications and information technology, the pressures of increasing urban traffic congestion, and intensifying economic competition at all levels of the economy. The primary business motivations to adopt telework were in 1973, and still are: office space savings; increases in productivity of teleworkers compared with in-office workers; and enhanced employee retention and/or recruitment rates.
1.3.1 Barriers and constraints
By far the most powerful and important barrier acting to regulate the rate of diffusion of telework is tradition; 19th century management style and methods. The overwhelming majority of companies, when queried about their attitude toward telework, answer with words to the effect of: "how do we know that they're working if we can't see them?" In short, there is an innate lack of trust between supervisor and employee or an automatic reaction based on long familiarity with the standards of the industrial revolution. Although it has repeatedly been shown that these concerns are groundless in well-managed telework programs, they persist.
Information and communications technology available today throughout much of the world is entirely adequate for the support of much higher levels of telework than are now being practiced. Yet, technology limitations are often cited by prospective employers of teleworkers as being either inadequate, or too expensive, or both, to support effective teleworking. At current levels of technology available in the US these constraints are valid only for some very data intensive tasks. Since the cost of telecommunications is the primary operating cost of telework, it can act as a constraint for some bandwidth-intensive forms of telework, such as high level graphics and engineering design work.
There are few legal and regulatory barriers to telework in the United States other than those relating to telecommunications regulation. Those that do exist tend to be local in nature. The most prevalent barriers are local restrictions on home-based work. These are being-or recently have been-lifted in major US cities.
1.3.2 Future developments
If telework acceptance rates continue according to our forecasts, there will be almost 29 million US teleworkers by the end of 2003. Most of them will be home-based telecommuters and will telework only part time, with the rest of their work time spent in their employers' or clients' facilities. At least three of every five teleworkers will be employed by SMEs. The proportion of teleworkers who are not telecommuters will also increase as a consequence of growth in teamwork among distributed organizations and in the expansion of multiregional and multinational telework-enabled trade. Part of the growth rate will depend on the extent to which telecommunications costs are reduced by increased availability of broadband services to households.
1.4 Diffusion enhancement measures and prospects
1.4.1 The policy background
Although the dominant public policy stance toward e-commerce and new ways to work in the US has been to stay out of the way, there are policy measures at all levels of government that can act to increase the growth in both areas. Furthermore, some prior policy decisions were vital to their development. For example, the Internet stems from the decision by the Defense Applied Research Projects Agency (DARPA - an agency of the US Department of Defense) in the late 1960s to develop a distributed communications network that would be essentially impervious to a nuclear attack. The National Information Infrastructure Act of 1993 set up the public-private sector cooperation that helped accelerate development of the hardware, software, networks, and systems needed to provide the world's best information access to ordinary Americans. The Telecommunications Act of 1996 was the first major overhaul of telecommunications law in almost 62 years. The goal of the law was to let anyone enter any communications business and to let any communications business compete in any market against any other, thereby reducing the cost and improving the quality of telecommunications to everyone.
The Department of Transportation and the Environmental Protection Agency released positive reports on the desirability of telework. Other initiatives at federal, state, and local levels have resulted in successful and growing telework demonstration projects.
1.4.2 Conclusions
The growth and breadth of diffusion of e-commerce and new ways to work in the US exceed the ability of various market research organizations to keep track. Most of the impetus for this growth has come from the private sector, which is also one reason why it is so difficult to get comprehensive and accurate growth estimates, due to the hesitancy to release information of use to the competition. Possibly the greatest impediment to growth has been the patchwork of federal, state and local regulations governing the telecommunications industry.
Interest and participation in e-commerce is high in the US and is accelerating-perhaps too fast for the industry's own good. The primary deterrent to faster growth is the level of concern for security and privacy of transactions, coupled with a satisfactory micro-payment system for business to consumer e-commerce. Federal polices have tended to increase the move to e-commerce.
Similarly, the growth rate in adoption of teleworking is still in the double digits, although the annual rate is expected to fall below 10% by 2003. The growth is primarily the result of individual decisions by organizations in both the public and private sectors that teleworking is good for business (increased effectiveness, enhanced retention/attraction of employees, and cost reduction as the top three motivators). The current economic climate in the US (excess demand for skilled workers) will act to increase the levels of teleworking, both for telecommuting (local workers) and national to international scope teleworking. Still, most government policies on transportation are counterproductive, tending to subsidize private automobile use, rather than telework, for work-related purposes.
1.5 Recommendations
In general, these recommendations do not have specific timelines associated with them, except "as soon as possible."
