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The Internet is a spending catalyst

The Internet will be the most significant driver of spending for enterprise software for the foreseeable future.

It is no secret that the Internet is having a profound impact on our society and our economy. We are rapidly evolving into a networked economy where location and time are no longer barriers to conducting business.

As such, the Internet is fueling a significant shift in the way corporations formulate their business strategies. In one respect, the Net is acting as an "enabling" technology, replacing previous communications options that were either too expensive or simply not available for many firms before the advent of the Internet.

The Internet is helping corporate enterprise take advantage of a number of new, more efficient business models in such diverse areas as distribution (information and product), customer interaction, business-to-business and business-to-customer commerce, and supplier coordination.

By providing a new low-cost communication medium to link customers, suppliers, business partners, and "virtual" employees on one integrated network, the Internet will revolutionize the way companies conduct business--in ways we can not even imagine today! This, I believe, will mean that the Internet will be the most significant driver of spending for enterprise software for the foreseeable future.

In essence, the Internet is emerging as a mission-critical platform for integrated "webs" of commerce. As such, the Internet is acting as a catalyst for a spending boom that will dwarf the spending on enterprise software to date. Software vendors with the appropriate solutions will be able to take advantage of that increased spending by firms looking to create these "webs," whether between business communities, businesses and consumers, or remote employees and consultants (allowing the so-called virtual corporation).

For example, most corporate enterprises now realize that they must have a significant Internet presence to take part in the e-commerce, or more appropriately, I-commerce, revolution. This requires more than just a static web page, which is nothing more than an electronic brochure. True e-commerce requires robust, mission critical systems that can be accessed via a Web browser. Vendors like Bluestone Software, BroadVision, Vignette, and OpenMarket, which offer full fledged e-commerce software solutions that enable scalable, enterprise-level commerce over the Internet, will benefit.

In addition, so-called front office software--which includes customer care, sales force automation, supply chain planning, and execution software--will also see a jump in sales. Software solutions such as these will allow companies to access, track, and better communicate with customers, as well as improve sales force productivity, reduce inventory and work-in-process, improve customer collaboration, and allow customization on a large scale to meet individual customer needs. Leading vendors in this space include Siebel Systems, i2 Technologies, and Manugistics.

Additionally, the need to gather data about customers over the Internet will be paramount. The increased use of data warehouses and so-called datamarts--databases specifically designed to capture Web information, decision-support software (DSS), middleware, and document management software--will be required. Vendors who will benefit in this space include Oracle, MicroStrategy, SAGA Software, and BEA Systems.

In summary, after a decade of increasing operational efficiencies and reducing expenses, most business enterprises will focus on increasing the top line. This will require companies to collect and leverage vast data stores to more effectively market and sell products and services, improve communication and coordination with suppliers and end customers, and provide access to mission critical back-office systems via the Internet. Investing in those software vendors that will benefit from these trends should provide investors superior returns.