E-commerce will be the engine for the sustained growth of the world economy in the years to come, said CHS Electronics' Chairman and CEO Claudio Osorio, in his closing keynote speech last week at Comdex Miami. CHS Electronics distributes microcomputers, peripherals and software.
"It is a brave new world out there. It is a new era where many of the old paradigms have collapsed or are collapsing. It is a cyber-revolution," he said.
The Internet is revolutionizing the business value chain, Osorio said. As transaction costs in the open market approach zero, the size and organizational complexity of modern industrial firms will become uneconomical, he said. Firms will tend to become smaller and will be comprised of complicated webs of well-managed relationships with business partners, Osorio said. He stressed that all parts of the value chain will be interlinked and will operate in real time.
E-commerce has allowed corporations to generate incredible cost savings, Osorio said. A recent study shows that by the year 2002, businesses using the Internet will save $1.25 trillion, up from the current figure of $17 billion. As the stock market clearly shows the rewards for new, lucrative ideas are becoming greater and greater, he said.
In addition, the market is becoming more customer-centric, he said. Traditionally, enterprises have competed on the basis of price and, especially in the computing industry, on the basis of technology, but this will no longer be enough, he said.
"Those two elements today - they barely let you open the doors for business. The customer in the future will demand - on top of having the right price and the most current technology - excellent service, immediate availability and the fastest delivery time," he said.
Osorio went on to say that he believes that the biggest opportunity for growth within the field of e-commerce is broadening it out beyond the U.S. into truly global e-commerce.
Challenges hindering global e-commerce include the small size of individual markets, the higher cost per transaction because of the lack of economies of scale, cultural preferences in terms of what customers demand and language barriers, he said. A logistical backbone will also be required in each individual country.
Describing some of the current channel trends in the IT industry, Osorio said that outsourcing by manufacturers continues to increase. There is also the issue of intermediation vs. disintermediation. Manufacturers of products such as low-end PCs, who have smaller profit margins, do not want to go sell through intermediaries, but manufacturers who don't have a direct sales model that is efficient or big enough face the dilemma of how to go to market.
New forms of intermediation are also appearing, due to this lack of margins, Osorio said. In some instances, the manufacturer chooses to own the inventory all the way through to the moment of sale, so products are put on consignment in the intermediaries' warehouses. In some other cases, the intermediary acts as an agent, receiving a fee per transaction, he said. In yet other instances, the intermediary is simply acting as a point of fulfillment, he said.
The future is "terra incognita," Osorio said. "It is definitely a time where we will be walking a fine line, where no business will be safe. No business will be able to say 'We did it, this is it' because a new business model can be spread out so fast through the Internet and definitely kill you."
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