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Net investment still exceeds return

U.S. firms will invest $124 billion in the "Internet Economy" this year--and for every $1.50 they invest, they'll get back $1, a study says.

U.S. firms will invest $124 billion in the "Internet Economy" this year--and for every $1.50 they invest, they'll get back $1, according to a study by International Data Corporation.

The research firm defines the "Internet Economy" as "spending on technology deployment, marketing and sales, content creation, professional services, and education and training to support Internet technology-based applications." It goes on to define "benefits" as "a combination of commerce conducted over the Web and productivity savings from Internet applications." IDC is planning to release more results from its study of the Internet Economy at a conference next month.

But despite the fact that companies still will invest more than they get back this year, the outlook is rosy, according to IDC. The study predicts that the tide could turn as soon as 2000, with U.S. firms gaining more in benefits than they spend on Net investments.

"[The current] situation will change rapidly," IDC senior vice president John Gantz said in a statement. "Within five years, every dollar of Internet investment in the U.S. will be paying back $1.50, and the size of the total investment will be four to five times bigger.

"It looks like the U.S. cross-over point--from investment to payback economy--could come as soon as the year 2000," he added.

Not surprisingly, western Europe's lower spending on Internet investments--$44 billion in 1998--will delay its cross-over point to what Gantz calls a "payback economy." He predicted western Europe's Internet Economy would reach $170 billion in 2002.

"The big question marks are which U.S. regions and what countries are spending what on technology deployment, and how spending on content creation, marketing, and sales varies by region," Gantz stated.

IDC said it analyzed IT budgets and non-IT budget technology spending across an array of industries for its research on the Internet Economy. It also surveyed 600 "architects of the Internet Economy," in conjunction with technology business magazine the Industry Standard.