Julie MeringerGroup DirectorForrester Research Ltd.

eCommerce Next Wave: Productivity and Innovation

Theme

Leading organizations must use the Net to boost productivity

and drive innovation

Agenda

What is the state of eCommerce worldwide?

How will productivity play a role in eCommerce?

What new innovations will drive economic growth through 2010?

Average increase:

17%

Average decrease:

20%

European firms slow IT spending in 2002

0% 10% 20% 30% 40%

No change

Decreased

Increased

“Has your IT budget changed compared to last year?“

Source: Forrester Q1 2002 European survey of 212 technology leaders

Why? Economic malaise“If your budget decreased, how important were these

factors?“

Better efficiency with fewer resources

Completion of last year’s projects

Centralization of IT

Merger and acquisition activity

Not at allimportan

t

Veryimportan

t

Source: Forrester Q1 2002 European survey of 212 technology leaders

Economic downturnWeak company financial

performance

Decreased importance of eBusiness

Increased use of outsourcing

Economic downturnWeak company financial

performance

Decreased importance of eBusiness

Increased use of outsourcing

Companies expect spending to recharge . . .

0% 20% 40% 60% 80%

No change

Decrease

Increase

BudgetHeadcount

“How will your technology budget and headcount change in 2005?“

Source: Forrester Q1 2002 European survey of 212 technology leaders

2002 vs 2001 Tech Spending

2002 2001

<$1BOverall

Percent of

revenues

spent on

eBusiness

IT executives

Business executives

G3,500

3.5%3.1% 3.0%

3.4%

2.5%

3.5%

3.5%

3.6%

G3,500

IT executives

Business executives

Percent of

revenues

spent on IT

7.2%5.4% 4.8%

5.0%

4.7%

Base: executives at North American companies

% of revenues on technology initiatives

2002 IT2002 eBusiness

Financial

Distribution

Manufacturing

Other

Technology and

business services

13.9%3.9%

6.4%3.4%

5.4%4.5%

4.1%1.6%

9.4%6.1%

Base: executives at less-than-$1 billion companies

% of revenue from eCommerce

Base: executives at G3,500 companies

0% 5% 10% 15% 20% 25% 30%

Total

Electricity, gas,and sanitation

Insurance

Finished goods mfg.

Retail

Financial(noninsurance)

Primary productionand supply

Distribution

Services

Chemicals andpetroleum

Technologyand telecom

2002In 5 years

Forecast: Worldwide Online Trade Growth, 2002 To 2006

Rest of worldWestern EuropeAsia-PacificNorth America

2002

Total: $2,293.5(US$ billions)

$1,677.3

$341.6

$246.3$28.2

2006

$7,469.0$2,458.6

$2,645.6

$264.1

Total: $12,837.3(US$ billions)

2002 20042003 2005 2006

% of totalsales in

2006

North America

United States

Canada

Mexico

Total (US$ billions)

Rest of world

Western Europe

Germany

United Kingdom

France

Italy

Spain

All other

Asia-Pacific

Japan

Australia

Korea, Republic of

Taiwan

All other

Hong Kong

$1,610.4

$55.1

$11.8

$1,677.3

$2,293.5

$28.2

$246.3

$60.5

$51.7

$36.7

$28.9

$6.2

$62.3

$341.6

$200.5

$47.8

$29.4

$29.0

$19.3

$15.6

$2,527.6

$91.3

$23.3

$2,642.2

$3,878.8

$53.0

$560.8

$137.6

$113.1

$85.2

$68.4

$16.3

$140.2

$622.8

$359.2

$87.7

$55.2

$56.1

$35.7

$28.8

$3,759.7

$136.2

$43.9

$3,939.8

$6,201.1

$96.7

$1,076.7

$262.2

$210.1

$165.0

$135.9

$38.5

$264.9

$1,087.9

$625.4

$151.1

$97.1

$101.8

$62.5

$50.0

$5,296.9

$188.6

$78.3

$5,563.8

$9,240.6

$163.1

$1,747.5

$419.3

$330.6

$269.5

$226.7

$76.1

$425.2

$1,766.3

$1,056.8

$224.1

$156.8

$158.3

$96.4

$73.8

$7,091.6

$245.6

$131.8

$7,469.0

$12,837.3

$264.1

$2,458.6

$580.9

$454.6

$381.8

$322.6

$125.5

$593.3

$2,645.6

$1,650.2

$301.7

$231.9

$223.8

$139.2

$98.8

26.0%

26.0%

20.0%

10.0%

18.4%

4.0%

19.3%

21.0%

21.0%

20.0%

19.0%

15.0%

19.7%

11.9%

14.6%

22.4%

17.5%

19.6%

2.1%

22.1%

(numbers have been rounded)

B2B and B2C Trade As A Percentage Of Total Trade In 2006

Manufacturing Distribution Households

B2B B2C

Raw materials

(US$ billions)(numbers have been rounded)

Onlinetrade %

Total B2B

North America

Asia-Pacific

Latin America

Western Europe

Africa andMiddle East

Eastern Europe

$12,275.5

$2,460.4

$83.9

$68.6

$93.1

$2,320.3

$7,249.2

20.0%

59.1%

18.9%

0.8%

0.7%

0.6%

100%

Onlinetrade %

Total B2C

North America

Asia-Pacific

Latin America

Western Europe

Africa andMiddle East

Eastern Europe

$185.2

$6.3

$5.2

$7.0

$138.3

$219.8

$561.8

33.0%

39.1%

24.6%

1.3%

1.1%

0.9%

100%

Agenda

What is the state of eCommerce worldwide?

How will productivity play a role in eCommerce?

What new innovations will drive economic growth through 2010?

IT spending growth in percent

IT spending growth in millions of euros

Three phases of Net investment

1995 2010

Growth ininvestment

Experimentation1995-2000

• Web as separate business• Building presence• Ad hoc budgeting

2000 2005

• Net as integrated channel• Control costs• ROI-focused spending

Rationalization2000-2003

• Intercompany collaboration• Gain advantage• Measured innovation

Renewed innovation2002-2010

A new wave of productivity

2000 2012

IT productivity wave:

eBusiness productivity wave:Externally focused investments in technologies like supply chain and CRMyield efficiency gains in three key areas:

1. Lower transaction costs2. Improved market information3. Intensified new competition

1990

Productivity:(% change in

output perunit of

labor input)

Internally focusedoperational efficienciesfrom hardware, services,and ERP investments

eBusiness adds 15% productivity by 2012

0

4

8

12

16

2002 2004 2006 2008 2010 2012

Foundation Expansion Normalization

0.8% 1.7% 1.2%

Design: 9%

Produce 45%

Serve 46%

TotaleBusiness

productivitygain

Agenda

What is the state of eCommerce worldwide?

How will productivity play a role in eCommerce?

What new innovations will drive economic growth through 2010?

The X Internet refers to two “Xs”

An executable Internet that supplants today’s Web

An extended Internet that connects to the real world

Executable Internet builds conversations

Server

Endpoints

The Web only provides answers

Account summary

The Web

How much is in my account?

The executableInternet

The executable Net creates a conversation

What should I do with my account?

Financial services tools (executables)

Two-way conversation about my account

BUY IT NOW

Extendedendpoints

Extended Internet -- an Internet of things

Server

Endpoints

The X Internet connects digital to physical

Internetcomputers DigitalInternetusers

Physical

Vehicles

Telephones

Buildings

Temp: 52° F Fuel: 1/2 tank Door:

Closed

• Tag is integrated with door, fuel, and temperature sensors

• Sensor data is transmitted every few minutes

WhereNet devices simplify supply logistics

WhereNet devices simplify supply logistics

Yard inventory is conveyed to users through maps and reports

Colors indicate trailer status and alert conditions

Real-time alignment of supply and demand

GPS-enabled truck fleet

20-minute delivery window

Savings: $100 million

Summary

Leading firms must harness technology to drive productivity

Productivity via technology is eCommerce’s next wave

As productivity takes hold, innovation will reignite around the X Internet

Julie Meringer

+44 (0) 20 7323 7690

jmeringer@forrester.co.uk

www.forrester.com

Thank you