Years of E-Commerce Boom Or Multi-Year Slump?

The e-commerce boom has turned countless caffeine-addled GenXers into near billionaires. One day, they’re running up cash advances on 17 different credit cards while setting up shop in mom and dad’s basement, the next day, they’re meeting with Benchmark and Sequoia, securing the capital to race down IPO road.

The sober crowd down on Wall Street expects a technology stock adjustment. They would prefer a crash. It would give them some consolation for being late to the e-commerce game. Plus, they wouldn’t mind watching the Silicon Valley/Boston/Seattle bunch get theirs.

Dour Report Predicts E-Business Slump

The Nasdaq bust may or may not be on the way, but GartnerGroup released a curious study at a conference in Cannes, France this week.

The research firm has been throwing around an interesting prediction for about a month now: “75 percent of e-business projects will fail their objectives due to fundamental flaws in project planning.”

The new report takes that downbeat note and improvises a bit. The study offers a ten-year prediction of e-business with the boom hitting its peak in 2000, followed by a quick plunge and a multiyear slump from 2001 through 2004.

After that, it’s a slow, unimpressive incremental recovery.

Their reasoning? We’re dizzy with hype right now, and companies are lunging onto the Web with nary an idea of how to plan for sustained success. GartnerGroup claims that disillusionment will come to both brick-and-mortar and dot-com companies as theire-business attempts fail.

The report goes on to predict that a successful re-emergence of e-business will come from hybrid “brick and click” companies that have learned e-commerce from watching the blows taken by less fortunate ventures.

GartnerGroup vice president of e-business transformation Alexander Drobik points to a way out of this morass. “To succeed, companies need astute business practices combined with a company vision that will cut between the hype and the reality surroundinge-business,” he said.

That makes sense, of course, but it is true of any business effort at any time in any market.

Valid Prediction, But…

I thought that the report was a bulls-eye. Every prediction, from the early hype to the quick crunch of business reality rings true. Even the slow, sadder-but-wiser, rebuilding makes sense.

However, instead of placing this scenario over the ten-year period from 1998 through 2008, I’d place it in the years 1992 through 2002. I think we’re in the rebuilding stage now. The shakeout and slump were the early efforts of e-commerce suffered by companies like CompuServe, Prodigy, and Microsoft’s Slate.

The major magazines are just now figuring out how to get the nose of their descending Internet jets back in the right direction. They spent half a dozen years trying to figure out why their Web sites were bleeding so heavily.

Even if they pull out of their eight-year nosedive now, it will be many years before they recoup their Web losses.

If anything, they’ve learned an all-important lesson: It is just as risky staying out of e-commerce as it is jumping in.

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