EXCLUSIVE INTERVIEW
IBM Director Bart Lautenbach Forecasts E-Business Future

Predicting where an industry is headed is a tricky endeavor, especially if that industry is e-commerce. Many signs point toward a bright future: Online shopping activity is soaring, holiday seasons are becoming positively merry, and customer service seems to be evolving well. On the other hand, some customers still fear identity theft, site usability is a continuing issue, and establishing an online brand is far from simple.

With such a rollercoaster business, anticipating the next mile of track is no easy task. However, Bart Lautenbach, director of WebSphere Commerce at IBM (NYSE: IBM), had the courage to do some forecasting in an interview with the E-Commerce Times.

E-Commerce Times: What are the largest general trends you see coming in the next year?

Bart Lautenbach: One trend this year will be that brick-and-mortar retailers will begin to take a more holistic view of how e-commerce ties into their infrastructure. They're thinking about how their sites work with order management and fulfillment. It's a big growth area, and we're seeing many small and medium-sized customers expressing interest for the first time in what the Web can really do for them in regards to tying everything together.

Another trend is that we'll start seeing new things that organizations will want to sell online, like digital content. And still another trend is the move toward promoting products as gifts. Gift registries are big, and they're going to get bigger. They're a big part of holiday buying, but e-commerce companies are starting to think about how to use them beyond that busy holiday season and really incorporate them into the larger strategy.

ECT: In what way are sites trying to incorporate the Web with their other strategies?

Lautenbach: It could be something as simple as offering a product online and letting the customer pick it up in the store. In the past, shipping fees have been a major barrier for people when shopping online. After all, if I buy a $30 item and have to pay $10 for shipping, that's a 30 percent fee. It's enough to make me not want to buy it. But the ability to bring the retail store and the online store together for one customer is something that many places have started investigating. Another way they're doing this is in offering coupons in the store that can be redeemed online.

Right now, it's all about bringing the customer to multiple channels and building loyalty that way. There's a trend we're seeing of people researching products online and then going and buying them in a store. However, one report noted that at least 50 percent of customers go to a store other than the one they used for research. They might compare DVD players on Best Buy's site but then buy one at Circuit City. So, finding a way to connect with customers across all channels is very important right now. It keeps customers from going to competitors.

E-commerce firms are also really thinking about how to have a unified order management system -- to streamline how customer service and fulfillment [are] done across the organization. At some point, you have to balance resources in your organization in order to cross-sell and make operations more efficient. That's what people will be looking at more closely this year.

ECT: What kind of new directions with digital content are we likely to see?

It won't be a change in the content as much as it will be a new way to sell it. For example, look at National Geographic. They're a leader in digital photography, and they're now looking to sell that product to other businesses -- companies that might want images in an annual report or direct marketing pieces. The way that used to be done was a customer would call National Geographic [and] tell the company what they wanted. Then a CD would be sent to them with some images, and they'd call back to say which one they wanted. Now National Geographic has their catalog online, which is much less labor intensive, and the company predicts that their digital photography business will grow threefold over the next few years. So, I think we'll see much more of this B2B activity around digital content, because people will find how efficient it is to use the Web with customers.

ECT: Do you think that e-commerce has learned how to plan for holidays and traffic spikes appropriately?

Yes, I think there's definitely more preparation now than there has been in the past, and we expect that to get even better. We're noting that customers want to do more testing at off-peak seasons. They also realize that there are some mini-benchmarks that they can use. For example, Mother's Day or Valentine's Day can be a mini-benchmark for some who specialize in gifts.

ECT: In terms of the future, are the goals being set at e-commerce firms different now than in the past, or have they remained the same?

Some of our customers have set very audacious goals for what they want their revenue to be 5 to 10 years out. This is a major change from the past. Then, it was: "What can I get done in the near term? What can I do in the next six months to earn enough to break even with my Web strategy?" Now, they want to keep the near-term focus, but they're incorporating that with larger plans for growth. They're looking at their online business in a very different way.

ECT: What happened to make companies move toward this long-term view?

There have been several trends in the e-commerce business that led to the kind of long-range planning that we're seeing now. For one thing, there's been very good growth from people buying more online. Also, a lot of people in the business in the late '90s overhyped the market and had poor business models. A director of e-business or a VP of marketing was in a tenuous situation in terms of buying decisions, because he was caught in a crossfire of hype and antihype. But over the past three years, we've seen this gradually changing, because what remains from that time are business models that have been proven.

I've heard many people say that the business models that they had were unrealistic, and they were waiting to prove the value of their e-business efforts before opening discussions about where the strategy needed to go. Those people were seeing significant value in Q4, and now they want to move forward with long-term plans.