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Study: E-commerce needs cooperation

Collaboration between businesses and government agencies is vital to achieving the full potential of Internet commerce, a new study says.

Collaboration between businesses and government agencies is vital to achieving the full potential of Internet commerce, according to a new study.

The report, from the independent research firm Forrester Research and dubbed "The Commerce Threshold," estimates that global Internet sales will reach $3.2 trillion in 2003 if this collaboration occurs and only $1.8 trillion if businesses and governments cannot work together.

The study defines "Internet commerce" as the trade of goods and services in which the final order is placed over the Internet.

The study noted that the Internet has experienced the fastest adoption of any technology in history, bringing millions of people online in a few short years, and that Internet commerce also will be accepted quickly.

Forrester said that each country interested in pursuing Internet commerce will face a threshold--a window of opportunity in which the public and private sectors must act for e-commerce to grow rapidly.

"More than $1 trillion in global Internet commerce depends on how effectively businesses and governments can work together on shared goals," Michael Putnam, an analyst in Forrester's Business Trade & Technology Strategies service, said in a statement. "The hypergrowth period of Internet commerce will be a maelstrom of activity as key industries struggle with the impact of e-commerce on established business models."

The commerce threshold is a critical period because firms and governments that miss the opportunity will have to work much harder, spending more with lower returns, to get on the e-commerce power curve, the study noted.

The report See news analysis: 
What Congress really did comes just as President Bill Clinton recently reaffirmed his belief that the private sector, not government, should lead efforts to boost Internet commerce.

But Congress recently passed four pieces of legislation to advance the e-commerce agenda: a three-year moratorium on new Internet taxes, ratification of an international copyright treaty, privacy protections for children online, and an initiative to encourage electronic filings and record-keeping in the federal government.

Forrester also assessed the readiness of 53 countries for Internet commerce, projecting the time it would take to achieve market saturation, and estimated the impact of e-commerce on business revenues. The study took into account the quality of the infrastructure, the likely level of demand, and the existing regulatory environment. Based on Forrester's analysis of current technology, the long-term impact of Internet commerce will fall between 7.5 percent and 17.5 percent of total sales in an industrialized economy.

As the first country to reach the e-commerce threshold, the United States is providing a benchmark for other countries. In 1998, 20 percent of very large U.S. firms will have built Internet commerce systems, a figure that Forrester expects will reach 65 percent by the end of 1999.

The report noted that the success of companies such as Dell Computer and Cisco Systems is spurring new Internet-driven business models in a varied range of industries. With the U.S. government moving forward with legislation on Internet taxation, privacy, and consumer protection, Forrester said it expects the United States to enter the hypergrowth phase of Internet commerce in 2000.

Three countries--Canada, the United Kingdom, and Germany--will follow the United States into hypergrowth in rapid succession, according to the study. All three countries have close trade ties with the United States and have demonstrated an early commitment to e-commerce from both the private and public sectors.

A second group of countries--Japan, France, and Italy--will lag behind, held back by structural rigidity, inadequate Internet infrastructure, and relatively low Internet commerce demand, the report noted.