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`Global Digital Economy- The Inside Track`

By

Dr. COLIN THOMPSON

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`Global Digital Economy- The Inside Track`

By

Dr. COLIN THOMPSON

Proactive maintenance of an existing customer base to improve your `bottom-line`. This is thefuture strategy for all to be successful in a global `Digital ` trading environment.

Marketing to existing customers and prospects, with the goal of retaining their business whilestimulating the marketers` sales. Also, the important of the retention of employees in this task.

Building and Communicating Value will be the single most valuable investment your organisationmakes on the road to delivering sustainable shareholder value.

The creation of shareholder value is the primary objective of any organisation, be it a plc orprivately funded company - and research indicates that the pressure senior managers alreadyface to deliver value will intensify significantly into the future with a global `Digital` economy.

Today, it is vital that all senior management builds and delivers superior long-term value to meetand exceed the expectations of all its organisations shareholders.

Discover how this report will enable your organisation to deliver superior long-term value to itsshareholders and encompass the retention of its employees and customers.

Open your mind up to the `Challenges` we face in a global `Digital` trading environment to besuccessful.

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`Global Digital Economy- The Inside Track`

By

Dr. COLIN THOMPSON

Published in 2006 by:CavendishKings CourtSchool RoadBirminghamB28 8JGUK

Telephone: + 44 (0) 121 244 1802Fax: + 44 (0) 121 733 2902email: info@cavendish-mr.orgWebsite: www.cavendish-mr.org

© Copyright 2006 Colin Thompson

First Edition 2006

The material contained in this report is set out in good faith for general guidanceand no liability can be accepted for loss or expense incurred as a result of relyingin particular circumstances on statements made in the report. The Laws andRegulations are complex and liable to change, and readers should check thecurrent position with the relevant authorities before making personalarrangements. The information contained in this report as been researched andcollated from various sources.

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`Global Digital Economy- The Inside Track`

Contents

PAGE

Profile: Colin Thompson 5

Executive Summary 7

Defining the Digital Revolution 8

The Digital Economy 11

E Commerce 29

The Relationship between Information and Knowledge 40

Digital Entrepreneurship and Innovation 41

Strategies for a Global Digital Economy 55

Other Business Models 61

PROVIDING THE SOLUTIONS FOR SUCCESS

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Profile

Dr. Colin Thompson

Colin Thompson has over 30 years experience as Managing Director and Director. Hiscareer to date has given him a complete exposure to business management andmanagement of people. He has wide experience in PLC and private company’s in top levelmanagement of increasing sales/profit. Also, turnaround and re-engineering experiencelinked to new corporate identities and successful mergers/take-overs. Plus, developed manybusiness models to increase profitability.

Technical skills/knowledge

DirectorshipsManaging DirectorDirector-Print Management and Workflow SolutionsDirector-Operations/Customer Service and MarketingDirector-Financial and AdministrationNon-Executive Director

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Professor-European Business School, Cambridge

Initiated New Corporate Identities, also Managing Director:Datagraphic Inc. UK, division of USA GroupForms UK plc (etrinsic plc) division of InnerWorks Inc.USAWH Smith PLC-Print/Distribution and Workflow SystemsKenrick & Jefferson Group LtdMail Solutions Group Ltd, division of SSWH PLC

Able to successful bring new Products and Services to market i.e.

a) Set up new UK `green field` manufacturing/distribution/workflow systemsoperations and market new Products and Services.

b) Research, development and design of a Print Management Service, includingwriting a book `Print Management and Workflow Solutions`, plus many otherpublications and business models on CD/Software.

c) Produced CD-ROM `Interpreting Accounts for the Non-Financial Manager`-adapted from my two-day course for Anderson’s-Chartered Accountants fortheir clients. Plus, CD-ROM on `Managing for Customer Care`.

My training and knowledge has enabled me to take an overall view of an organisation, itsoperations and strategy. Also, to understand with a degree of competence in a wide varietyof business skills and functions. I have dealt with challenges at a high level of complexity,especially those that cut across the common functional divisions of business. Developedseveral business models to raise the `bottom-line`.

Education: BA, MBA, DBA, CPA, FFA, MCIPD, FIOP, MCIJ

My experiences and knowledge have enabled me to write and have published over 400articles worldwide, several publications, research reports, guides, business and educationalmodels on CD’s/Software plus speaking at International Conferences, Seminars, Lecturesand a Visiting University Professor on the international circuit.

DDL: + 44 (0) 121 244 0306Mobile: 07831 588310email: colin@cavendish-mr.orgWebsite: www.cavendish-mr.org

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`Global Digital Economy- The Inside Track`

Executive Summary

While customer retention and its goals have not changed, the entire customer retention business is busyreinventing itself from what it was just a few short years ago. Whether new technologies drove newthinking or vice versa, it's hard to say. But, one think is for sure, what retention is - is really different. Newreporting and tracking methods reveal how customers interact with content, not just, where they go andwhat they open. Smaller, but highly qualified audience segments based on customer intelligence arereplacing broad, shallow pools derived solely from basic demographic information. Moreover, customersare no longer sitting back and waiting for the next brand experience - they are finally having some say indeveloping it.

Simply put, the goal structure is as shown below:

Distinctive Capability - The clutch of skills or competencies that distinguishes the company from thecompetition and will enable it to seize the opportunities that arise in the future - whatever they may be.

Market/Product - The focus of application for the company's skills and competencies.

Identify - Communicating a clear, positive perception and image of the company to each of theaudiences who are important to its future wellbeing.

People - Organising the skills and competencies of the company to meet the needs of the customersboth now and in the future.

Profit/Performance - Defining the results expected.

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Defining the Digital Revolution

I am going to talk to you all today about this concept called the `Digital Revolution` and other innovation inthe `Thriving Global Digital Economy`.

This is the general assumption that:

- we are moving in an information society;- there is a new paradigm in the economy;- we are coming to the end of industrialism;- the nation-state is in decline in developed countries;- all the old beliefs will give way to something new; and- we are moving in a world more hi-tech but more natural at the same time.

These theorists argue that we will have a break with the past, and that this break is redemption of theproblems from the industrial society. What interests me is that this new rhetoric is actually a very old idea- net hype is the latest version of something one hundred years old: the technological revolution. Post-industrialists claim that the reason we are moving from the past into the future is due to technologicalconvergence, advances in the media and telecommunications.

I find recent articles proclaiming the triumph of new values springing from rising ownership of personalcomputers and presence on the internet interesting because this is exactly what Joseph Stalin said aboutthe industrial revolution. This new paradigm is more natural is what Herbert Spencer, the great Englishliberal theorist of the19th century, said about the new society in his day.

As for globalization, lots of people are talking about it, but the economy has only recently become asglobalized as it was in 1914. In fact, if you read 19th century theorists or early 20th century theorists likeMax Weber, you find that globalization is not new.

On the rhetoric of the revolution

We need to understand that this rhetoric of the break is actually a very old rhetoric and hides continuities.For example, in England, in the early 19th century, more than 50 percent of the population was living inthe city. This is only just happening in many parts of the world - huge populations still live in thecountryside where they are still `peasants` and not modern in the sense that we mean it.

The point is that traditional societies have been very successful historically speaking, and have produceda steady state of agricultural society. Modernity is a recent phenomenon.

The new state of modernity is a process - it is not a constant state; it is forever changing. Theprecondition of capitalism is that there are no preconditions. This is difficult for many people to acceptbecause it is both negative (creates insecurities) and positive (brings freedom and prosperity).

No such thing as the information society

We have to understand that there is not a break from industrialism - there is no such thing as theinformation society or post-industrialization. Instead, there is an intensification of a long historical process;an extension of a process from the heartlands of capitalism right out into the mass of population. Therhetoric of the break tends to obscure this fact.

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Thinking about the system

We need to think about how the following elements are applied:

- Financial markets- Global market coordination- Production process intensifying the factory system (This is not a break fromFordism, but a more efficient form of the Fordism.)

The major impacts of new technologies are to extend and intensify things that have already existed. Oneof the major advantages of the net is that people can publish materials to the world. The struggle forpress freedom is essential to the modern state, but it has been a very long struggle. The Internet extendsin practice the formal rights asserted long ago by the French Revolution, the American Bill of Rights, andother sources. Thus, the net is developing and extending these freedoms; it is creating a space fordiscussion among the general population.

Media freedom allows extension of discussion of politics to the common man.

Technology and the state

The information revolution is promising a number of things for the state and the democratic process:electronic voting will encourage participation, making state programmes more effective and enabling thestate actually to deliver what it promises.

What we see is not a shift away from the present - the Internet reinforces existing community and socialstructures.

One of the great accomplishments of the net was to scuttle the Multilateral Agreement on Investment(MAI) . Opposition, when organized through the net, can reach people on a global scale, thus building onand intensifying things that happened in the past. Public campaigns become more effective.

Modern world an extension of industrialism

The digital revolution is not a revolution, except in a rhetorical sense. It is not a break fromindustrialization but an intensification of modernity.

Although modernity offers greater wealth, personal freedom, and greater choices, it is a double edgedsword. There are evil tendencies contained within; modernity is not necessarily progressive. The lastcentury has been dominated by reactionary tendencies in many ways - Nazism, Stalinism, and the regimein Serbia, for example.

Modernity (in the long term) can be progressive but within it come repression and reactionary ideas. Thedigital revolution has become a substitute for the social revolution. We lack a vision of the future -technology is a mechanical redeemer, because the social revolutions are no longer believable. Ourcapacity to dream and imagine is being diminished.

We are looking for technological solutions for social problems, when practical solutions are needed. Forexample, genetic modified food will not solve world hunger. We do not require new crops but rather landreform and a cure for poverty. The digital revolution provides a way to avoid thinking about more profoundideas. We need to think about what we can do with technology because at the end of the day, a computeris just sand, plastic and metal. However, with these tools, we can create important relationships betweenpeople.

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Key effects of intensification

One positive effect of the intensification of industrialism is that it has revived artisan work. Although thefactory system gave us greater wealth, the work itself was alienating and boring. Though the productionof media, software, and other high tech products, skilled labour has been revalueized. In the 19th century,we took people off the land, and put them to work on intelligent machines. Now, the digital revolution hasmade skilled labour important once again.

The second key factor is that workers want to control their own factors of production. A great advantagetoday is that workers have control over not just pace but the technologies used in work. This creates astronger sense of self identification, and fosters pride in one's work. These are positive, optimistic resultsfrom the digital revolution.

The gift economy - emergence of non-commercial labour

New ways of organizing collective labour are emerging. Traditionally, this has been the role of the marketand/or the state. However, over the last decade, the net has highlighted other methods of organizinglabour, particularly the gift economy. Strangely enough, there is a joke that the only working example ofcommunism was created in the US by the American military, because the Internet is based on thecirculation of free gifts, without copywrites or commodities. The most obvious example is the open sourcemovement, such as Linux. Apache, the most popular Internet server software, is also free.

Within the net, the music industry exemplifies the gift economy. MP3, which distributes music on the netfor free, is on the cutting edge of the music industry. The point is not that the music is distributed for free,but that it is no longer passively consumed. MP3 distributes original music, which has never beencopyrighted and can be remixed by listeners. It is more efficient, like most of the open source products.

These are the flagships that people notice. However, what I find most interesting is that there is a generalassumption that the net is free. People who try to commodify things have problems - there is a generalassumption that you should not have to pay for list-servers, or other Internet services. The circulation ofgifts is the best way to organize labour. It is 20th century communism, with a small "c." The circulation ofgifts is benign now - even the most gung-ho neo-liberal does not pay for websites, and finds himselfcontributing to list-servers and distributing his material for free. Most people take part in the gift economywithout even realizing it.

This concept does not function in the utopian sense, however. The reason that the net is non-commercialis thanks to the American taxpayer, who subsidized the growth of the Internet and computer softwareindustry through university research. It is hybridized with the market, but does not represent a great breakwith modernity either. The gift economy always existed - the net just makes it more explicit.

Conclusions

Rather than seeing the digital revolution as a break with industrialization, it should be viewed as anintensification or speeding up of the process. It is something that we can make choices about - we canchoose to emphasis a more emancipatory opening up of the world or we can choose to narrow it downand not realize these potentials within it.

Essentially, we are talking about a new vision of the mixed economy; however, instead of the narrowinterests of commerce or the state at the centre, the interests of labour are at the centre. This is bestviewed by both the revival of skilled labour and the emergence of non-commercial labour. The cuttingedge of new wealth is being created in non-commodified forms. This is not neo-liberal paradigm of thefuture but a new, more advanced form of social democracy, where labour has the right to wealth andwork.

We have arrived at the stage where we cannot dream of a new utopia, but because labour is soproductive and creative, we can create a better future in practice, in a way that our ancestors could onlydream about.

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THE DIGITAL ECONOMY

The Net is now the iconic technology of our age. Wired magazine has achieved global notoriety throughits claims that the Net will create the sort of free market capitalism until now only found in neo-classicaleconomics textbooks.

Everyone will be able to buy and sell in cyberspace without restrictions. States will no longer be able tocontrol electronic commerce which can cross national borders without hinderance. The Net will allow thewhole world to realise the American dream of material riches. Coming from California, this neo-liberalfantasy has even acquired a mystical dimension.

By releasing the supposed laws of nature immanent in unregulated capitalism, the informationtechnologies will allegedly lead to the birth of a new race of 'post- humans': cyborg capitalists freed of therestrictions of the flesh. Like Victorian factory-owners, hi-tech neo-liberals believe that their narrow self-interest represents the pinnacle of Darwinian evolution.

The Californian ideology is the fantasy of the 'virtual class': the West Coast entrepreneurs and engineerswho hope to make their fortunes out of the Net. Yet, Europeans are not immune from the influence of thisCalifornian dreaming. With the collapse of Stalinism, many intellectuals have adopted a stance of post-modern nihilism which offers no alternative to neo-liberalism. Some on the Left even take a masochisticpleasure in seeing all forms of technological innovation as the triumph of capitalist domination.

According to these pessimists, the cause of labour is lost in cyberspace. Yet, the hi-tech neo - liberalismchampioned by the Californian ideologues is itself an attempt to control the Promethean power of humancreativity. As global communications have improved, the wider availability of capital and materials hasundermined social power based solely on the monopoly control of wealth. Above all, constanttechnological innovation makes success in the marketplace increasingly dependant on the skills andenthusiasm of the workforce. In the emerging digital economy, nothing is more precious than humaningenuity.

For over two hundred years, the boredom and discipline of the factory system were accepted as the onlypossible methods of increasing our material wealth. Under Fordism, workers could live better thanmedieval aristocrats. However, once the consumer society was no longer a novelty, many people startedlooking for something beyond money.

Ever since the '60s, workers have been seeking more autonomy in their jobs and more freedom in theirpersonal lives. Abandoning traditional conservatism, neo-liberals have used marketisation andprivatisation to recuperate these aspirations. For instance, talented workers within the hi-tech industriesare promised the possibility of running their own companies and enjoying the independence bought bygreat wealth. If you have a good idea and lots of luck, you too can become a member of the 'virtual class'.

However, this hi-tech neo-liberalism is a false dream for most people. In the USA, average wages havebeen falling for twenty years. In the EU, mass unemployment has become a permanent phenomenon.Even the lucky few of the 'virtual class' cannot completely isolate themselves by hiding in their gatedsuburbs and encrypted cyberspace from the social and ecological problems exacerbated by neo-liberalism.

Above all, free market solutions cannot remove alienation within the workplace. Under neo-liberalism,individual autonomy is only expressed through deal-making rather than making useful and beautifulartifacts. The history of computing and hypermedia is filled with sad tales of engineers and artists whohave sacrificed their creativity to the demands of paper-shuffling.

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In place of the Californian ideology, what is now needed is a more profound understanding of the impactof the Net on our society. For, instead of being the technological expression of neo-liberalism, the

emergence of the digital economy demonstrates the need to create a twenty-first century form of socialdemocracy.

The origins of the Net itself expose the fairy tale quality of the Californian ideology. Far from being theproduct of the free market, it was created as one part of a huge military research programme funded byAmerican tax-payers to counter the threat posed by the launch of the Sputnik satellite by the SovietUnion.

Like many Cold War inventions, the Net could have remained an official secret. However, when it wasbeing developed within the universities, academics and students hijacked the new technology for theirown purposes. From on-line discussion groups through electronic mail to the Web, the most popularfeatures of the Net were developed by enthusiasts.

This non- commercial ethos attracted others who began to develop the Net as a new form of communitymedia. Even today, the majority of the material available on the Net is made by amateurs. Although theyhave produced much of the hardware, it is the entrepreneurs who were the last people to comprehend thepotential of the Net. The reason that Microsoft and other corporations are pouring billions of dollars intocyberspace is precisely because they have to catch up with the widespread use of the Net by state-funded institutions and by d.i.y. culture.

The Net, therefore, is not the harbinger of a globalised unregulated marketplace. On the contrary, itsprofane history exemplifies the miscegenation of state, commercial and community interests within theemerging digital economy. Each sector will have its part to play and each cannot exist without the other.

For example, public intervention is needed to ensure that a broadband network linking all households andbusinesses is built. If left to unregulated market forces, universal access to the new information serviceswill be very slow in arriving. Yet, the commercial potential of the Net can only be fully realised through theconstruction of the fibre-optic grid which covers the whole population. As with earlier types of utilities,profitable on-line businesses will only flourish through state regulation - and even ownership - of thedigital infrastructure.

Similarly, the further development of d.i.y. culture is also necessary. As the history of the Netdemonstrates, hacking, piracy, shareware and open architecture systems all helped to overcome thelimitations of both state and commercial interests.

Whether for political or profit-making reasons, large institutions are still trying to impose their ownproprietary controls over cyberspace. Yet, one of the major attractions of the Net for its users is that it isnot tightly controlled by any major public or private bureaucracy. Already, a minority of the population canuse the Net to inform, educate and play together outside both the state and the market.

Once a broadband network is built, everyone will have the opportunity to join this hi-tech gift economy.Most current Net users don't simply download other people's products. They also want to expressthemselves through their own web sites or within on-line conferences. Unlike traditional media, the Net isnot a spectacle for passive consumption but a participatory activity.

Ironically, this d.i.y. culture is also one of the essential preconditions for the development of a successfulcommercial sector within the Net. By allowing people to acquire some basic knowledge of makinghypermedia, the hi-tech gift economy is helping to create a skilled and innovative digital labour force.

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However, it is very difficult to adapt the traditional factory system to managing these new workers. Therapid spread of personal computing and now the Net are the technological expressions of the desire ofmany people to escape from the petty controls of the shop floor and the office. Despite the insecurity ofshort-term contracts, they want to recover the independence of craft labour which was lost during theprocess of industrialisation. Because of rapid technological innovation, skilled workers within thehypermedia and computing industries are precisely those best able to assert this desire for autonomy.

While neo-liberals can only promise success to a privileged few, the re-emergence of artisan methodsoffers a way of working within the commercial sector which most creative labourers can adopt. Already,digital artisans are the people pushing the cultural and technical limits of hypermedia as far forward aspossible. Crucially, their virtual artefacts can be easily reproduced and distributed through the Net. Forthe first time, artisans can take advantage of the economies of scale up to now only enjoyed by factory-owners. Far from being a return to a low-tech and impoverished past, the contemporary revival ofartisanship is therefore at the 'cutting edge' of the development of post-Fordism.

The evolution of capitalism has been reflected through the process of technological advance. Whileclassical liberalism depended on coal-mining and metal-working, Fordism produced electro-magnetic andchemical technologies.

At the end of the twentieth century, it is now claimed that the Net is creating a new economic paradigm.However, the full benefit of an innovative technology can only be realised by changing the ways ofworking.

The rise of Fordism didn't just depend on the invention of the motor car and other mass consumer goods.Above all, this form of capitalism relied on the adoption of assembly-line methods of production. Even theCalifornian ideologues argue that the expansion of the Net depends upon the subordination or cooption ofworkers by unregulated markets. Despite their overt technological determinism, they implicitly accept thatthe organisation of labour is at the centre of the emerging digital economy.

However, in practice, hi-tech neo-liberalism is hindering the development of a thriving digital economy.For instance, only a small minority can be lucky enough to become members of the 'virtual class'. Thecreative potential of most makers of hypermedia will still be limited by Fordist methods of production. Thisis why we should not be intimidated by simple-minded slogans from California.

Instead, we need to comprehend the complexity of the mixed economy being produced by post-Fordism.Above all, we have to recognise that human ingenuity is the most important feature of this emergingdigital economy. The state, commercial companies and d.i.y. culture are all different ways of realising thePromethean spirit of human creativity.

Under Fordism, the factory worker was seen as a heroic figure - the embodiment of hope of a betterfuture. In contemporary society, the digital artisan has taken over this role. Whether producing inside thepublic, money-commodity or gift economies, digital artisans represent a future centred on skilled, creativeand autonomous labour. The promise of the digital economy lies not just in the practical potential of thenew information technologies, but, more importantly, in the emergence of this new type of worker. This iswhy the digital artisans are pioneers of a social democracy fit for the twenty-first century.

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Digital Economy: Issues and Challenges

Abstract

Globalization and technological change continue to profoundly affect economic growth and wealthcreation. Information and Communications Technologies (ICTs) have been a key enabler and driver ofglobalization, which is likely to continue as trade and investment barriers continue to fall andcommunications become ever cheaper, easier and more functional. "National" economies, created by theIndustrial Revolution in the 19th century, will continue to blend into a 21st century integrated, digital worldeconomy, with an increasingly global division of labour.

Every economy requires a physical, institutional and legal infrastructure, as well as understandable andenforceable marketplace rules, in order to function smoothly.

In this paper I maintain that such an infrastructure must be developed for the new digital economy andsociety, one which provides trust and confidence for all those who operate in or are affected by it. Aninfrastructure that is an amalgam based on hardware, software, networks and a way of doing businesswhich offers predictability, dispute resolution, legal recourse, policing powers against fraud,authentication, etc. The building of such an infrastructure is a necessary condition for the developmentand efficient functioning of a global, digital economy.

Introduction and Context

"The crime of identity theft undermines the basic trust on which our economy depends". President GeorgeW. Bush, as quoted by D. Scott Parsons, Deputy Assistant Secretary for Critical Infrastructure Protection,at the FDIC Identity Theft Symposium, Los Angeles, June 17, 2005 [29].

"Everything on the Web is ultimately about Trust." Nicholas Negroponte(http://www.blackhat.com/presentations/bh-usa-00/Edward-Schwartz/KellyandSchwartzPrivacy-1.ppt)

Globalization and technological change continue to drive economic growth and wealth creation. Over thelast 25 years there has been a huge increase in global trade in goods and services, and globalinvestment flows, and the pace of globalization is accelerating.

Technology has been a key enabler and driver of globalization, which is likely to continue as trade andinvestment barriers continue to fall and communications become ever cheaper, easier and morefunctional. Today's "national" economies, created by the Industrial Revolution in the 19th century, willcontinue to blend into a 21st century integrated world economy, with an increasingly global division oflabour for the production of both goods and services.

Global electronic networks of increasing power and pervasiveness form the communications backbone ofthis 21st century world economy, just as railroads, steamships, telegraphs and postal systems formed thetransportation and communications infrastructure for the 19th century industrial economies.

The foundation for the creation of the new digital economy, also referred to as the e-economy (the twoterms will be used interchangeably) is the rapid and effective deployment of information andcommunication technologies (ICTs), in all sectors of the economy, and to consumers at large.

Widely available, high powered networks allow information exchange at very low cost, reduce thenegative role of distance and enormously increase the ability to coordinate geographically separatedeconomic activities (cf. "The World is Flat". The central role of ICTs is increasingly identified as thefundamental factor in this economic transformation, which has also led to global supply chains and theoutsourcing and off-shoring of an increasing range of activities related to these supply chains.

The commercial emergence of the ubiquitous Internet and the growing importance of electroniccommerce and e-business in the global economy, are indicators of this transformation.

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As noted above, the growth and productivity of advanced economies has relied heavily on ICT-basedproduct and process innovation. The key factor driving the implementation of e-business throughout theeconomy is the competitive advantage such technologies and applications offer to those who adopt themfully.

E-business solutions allow organizations to streamline production, reduce operational costs, expandmarkets, increase revenues, enhance collaborative business partnerships and strengthen customer andsupplier relationships. By enabling collaborative activities to be carried out at widely dispersed locations,and by supporting process and product innovation through the application of e-business in all its variousforms, networks have become an indispensable platform for industrial productivity and growth.

Firms as disparate as Wal-Mart and Dell Computers represent outstanding examples of the use of ICTsto transform business processes and operations. Similarly, the use of computerized reservations systemshas transformed the working of the huge travel and tourist industry. World-wide electronic creditauthorization and payment systems, deployed by consortia such as VISA and MasterCard and firms suchas American Express, have changed the way in which consumers shop and merchants do business.

Payments and financial transactions are the lifeblood of economies. Private sector joint ventures like Visaand MasterCard, along with the large banks, have helped to create a global electronic payments network.

It is a dynamic, innovative system that spurs economic growth by providing fundamental benefits such asa safe, sound and predictable international payments network connecting buyers and sellers; ever-increasing levels of security and consumer empowerment; greater economic transparency; increasedeconomic stimulation; and widened participation in the banking system.

This global electronic payments network accrues benefits to economies and people around the world.The widespread adoption of electronic payments has significantly expanded the sales volume of goodsand services, reduced the barriers to immediate credit and liquidity, and eased geographic restrictions totrade and exchange. To a growing extent, the Internet is playing a key role both as an enabler and as theinfrastructure underpinning this transformation.

The Internet has become the central nervous system for the networked economy. As a global network ofloosely connected Internet Protocol (IP) based networks, many thousands in number and growing rapidly,it reaches into every country in the world and provides businesses world-wide with a common platform forcommunication and commerce.

In its various forms and functions, it has become an essential means of conducting and coordinatingbusiness activities across the economy as a whole, linking business supply chains continent-wide andglobally, supplying and supporting financial services and creating a universal consumer marketplace.

Globally, the Internet is currently estimated to have almost 1.5 billion users, with very rapid growthoccurring in developing countries like China and India. China alone is now estimated to have some 100million Internet users. As in many other developed countries, most Canadians and virtually everybusiness are now connected to the Internet. In 2004, some 82% of all firms in Canada, accounting forsome 97% of Canada's gross business income, were connected to the Internet.

Consumers benefit from the added convenience these technologies and applications offer, includinggreater access to information and an expanded marketplace.

Since the Internet allows businesses to respond to consumers' inquiries, requests and transactions fromany location, buying and selling online requires an international set of rules, where citizens, institutionsand businesses can easily exchange information, products and services across borders and around theworld with predictable results and protection.

This makes conventional geographic borders less and less relevant. For example, personal informationcollected for an online purchase, by a company located in Vancouver from a Quebec-based consumer,could be stored on a server located in the United States or the Cayman Islands.

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As another illustration, information about the air travel movements of individuals who hold a membershipin an airline loyalty program can be collected at a destination in Europe or Asia, and transferred back toCanada for inclusion in the program's database for later use.

The combined forces of technological change and globalization pose dramatic new challenges for publicpolicy. In some respects, the Internet is similar to other ubiquitous communications networks that camebefore it.

Just like the postal system, the telegraph and the telephone, we have come to rely on the Internet as aninfrastructure that enables individuals and organizations to conduct commerce nationally and abroad,through the transmission of information. Like these other trusted networks, as we grow to depend on theInternet, a degree of safety and reliability is expected and needed.

But there is a key difference. Previous transportation and communications networks were birthed underthe watchful eyes of regulatory or legislative bodies, at the national level or through internationalagreements.

Users of such networks could have a modicum of confidence that their mail would not be tampered with,that railway lines would be inspected and maintained to ensure the safe running of trains, and that aircraftwould take off and land at airports in an orderly manner through the operation of an internationallycoordinated air traffic system.

However, the Internet has evolved at an unprecedented rate and since it consists of an agglomeration ofautonomous networks, it has characteristics quite unlike those of the earlier trusted networks. There are anumber of potential challenges that must be considered if we are to benefit fully from its existence.

The Problematique

"We will create a civilization of the Mind in Cyberspace". John Perry Barlow

"you must recognize that the Internet was set up largely by academicians for limited use, but has grownbeyond anyone's wildest expectations, with nearly one billion users today". Markus Kummer, ExecutiveCoordinator, Secretariat WGIG [36].

"The culture of the original Internet was one of trust". Leonard Kleinrock

The very success of the Internet as an economic tool and its ubiquity have lead to policy concerns andchallenges revolving around the vulnerability of the network and the economic consequences of misuse.

The Internet started as the creation of a small group of dedicated researchers and has now evolved into awidespread commercial information infrastructure, with tremendous influence on economies andsocieties. The Internet was never designed or intended for this kind of commercial use.

When the Internet was designed in the 1970s, its designers did not expect that the network would have tobe scaled to cover much of the world's population in over 180 countries, and security was not animportant consideration.

Concerns regarding security from hackers, congestion caused by spam, differentiated qualities of service,charging schemes and interconnection and revenue sharing arrangements between Internet ServiceProviders (ISPs) were not matters of major concern to the early designers and implementers of theInternet.

These matters came to the fore as the Internet began to evolve into a ubiquitous commercial medium. Itis a profound challenge to retrofit these necessary features while the Internet continues to expand rapidly,and its proponents try to accelerate its adoption and use by increasing numbers of unsophisticated users.

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Networks like the Internet and its enabled services, such as electronic mail and web-based services, areinherently global in scope, operating across multiple jurisdictions to serve international clients andmarketplaces.

Their borderless nature creates the need to meet national policy goals through the design of newmarketplace rules that can help to establish the trust and confidence required for doing business in thisnew environment. Over time, governments have played a crucial role by providing a positive legal andpolicy framework for technology innovation, investment and diffusion.

As markets and technologies continue to evolve, the importance of a dynamic, responsive policyenvironment that provides clear and consistent ground rules for the conduct of electronic business willgrow. The strengthening of business and consumer confidence in Internet applications and use,especially measures to ensure a safe, secure and reliable Internet, warrants particular attention frompolicy-makers.

Every economy requires a physical, institutional and legal infrastructure, as well as understandable andenforceable marketplace rules, in order to function smoothly. For national industrial economies, nationaland international infrastructures, as well as marketplace rules, were established through evolutionaryprocesses that took many decades to reach fruition.

The industrial economy achieved a stable institutional framework and communications infrastructure, builton national postal, telegraph and telephone systems, linked together by international institutions such asthe International Postal Organization (IPO) and the International Telecommunications Union (ITU), to givethem global reach.

In a previous paper, I noted that a similar infrastructure must be created for the new economy. Such aninfrastructure is based on networks (physical, institutional, legal) and a way of doing business whichoffers predictability, dispute resolution, legal recourse, policing powers against fraud, authentication, etc.In short, what is needed is an environment which provides trust and confidence for all those who operate,or are affected by the e-economy and society.

Also, I further contend that it is useful to examine the structures and study the experience of these pastsuccessful systems, to see what lessons can be learned for the implementation of a robust cyber-infrastructure to serve the needs of a digital economy.

This new infrastructure has been given many names; we have called it the cyber-infrastructure. Parts arein place now, but more is needed. The authors contend that we must become more aware andknowledgeable about the need for a cyber-infrastructure, how it comes into being and how extensive itmust be, to ensure the smooth functioning of global networks and the global digital economy theysupport.

Only by understanding and acting on the need for a CI will markets function smoothly in a global, digitaleconomy. An important related question is whether this can best be done by transforming the existinginfrastructure and marketplace rules, or whether new institutional approaches and market mechanismsare required which are more fully congruent with the characteristics of the Internet and other global digitalnetworks.

Public and Private Spaces

Much has been made of the uniqueness of the new world of information technology . It has been claimedthat the cyber-infrastructure will be new and novel and unlike anything that has come before.

This is only partially true.The technology is new but, as we have seen, the need for trust and confidenceis similar to that which was developed in previous eras for earlier trustworthy infrastructures. There areother ways in which the cyber-infrastructure will have some characteristics that are quite familiar.

Consider the issue of public space and private space.

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In today's world we know that, for example, walking on a public sidewalk in any city carries with it certainprotections and certain responsibilities. The pedestrian will cross at the crosswalk; cross on the greenlight; will try to be part of an orderly flow of other pedestrians; will not litter and will, in general, respect therights of others.

At the same time the pedestrian moves along with the knowledge that a variety of public authorities haveensured that the sidewalk is in reasonably good repair; that the law and police authorities offer protection;that there is legal protection regarding objects that might fall from buildings; legal protection vis-a-visautomobiles jumping the curb; protection from other motorized vehicles, etc.

Similarly, when the pedestrian moves into another space, a private space, the range of rules andresponsibilities changes. The pedestrian might enter an office building, or a building that houses doctor'soffices, or a shopping mall, or a hotel, or a bank. In each case there is a different set of "rules" that governthe protections and responsibilities that surround the pedestrian.

Perhaps the pedestrian can only get to the desk or a security guard and must present a pass or can enterthe shopping mall entirely or can enter the bank-only so far. To go further in the bank, say to the safetydeposit boxes, further information must be provided to the bank authority.

On the other side it is commonly known, but rarely considered, that the pedestrian's rights have alsochanged as he/she moves seamlessly from public to private space. There is enhanced legal protectionfrom panhandlers but diminished legal protections for "free speech." In the public space the pedestrian isfree to go just about anywhere; in the private space the pedestrian's actions are circumscribed.

In the public space a public law offers protection to the individual; in the private space there are privatesecurity guards and the public police are called usually only if a crime has been committed.

Or consider another familiar aspect of everyday life. We mail a letter or make a telephone call (especiallyon a landline) and can safely assume that there is no one listening in to the call and equally safelyassume that letter has not been opened or read by others. In fact both actions are punishable by law.

By now the reader is probably asking: So what? What is new is that there is also a public space and aprivate space in the cyber-infrastructure. There is the public Internet -- a kind of sidewalk -- that is in theprocess of developing "rules of the road." And there are private spaces such as e-commerce sites, onlinebanking, etc.

Over the many hundreds of years of law regarding public and private spaces, the rights andresponsibilities of all parties have been well developed. They are so well understood that we don't give ita second thought as we move seamlessly from public to private and back to public space (finally movingto our own private space which is our home which offers its own set of protections and responsibilities.)

In the cyber world we are still in the process of delineating these boundaries and defining what happenswhen the boundaries are crossed and who is responsible for enforcement.

When a bank is robbed it is clear where the enforcement takes place; when a keystroke spyware issecretly or covertly installed on a personal computer to record bank transactions and theft is later madefrom that account----who is responsible for enforcement? In the cyber world, citizens are constantly told toreview their credit reports, their bank balances, etc., to make sure that their accounts have not beenaccessed and that their identities have not been stolen.

We know that authorities are trying to stop such cyber crimes but the question is: which authorities?where? And how successful have been such authorities in stopping such cyber crimes and relatedactivities?

Emails can be intercepted and read by employers, by hackers and by the individual's own internet serviceprovider. It is a more open and less secure space. It seems to be a private communication but it is onethat can be read by others and there seems to be no body of law that protects the integrity of thecommunication.

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We are slowly getting used to the fact that the public space of the internet can be a "dark and dangerous"street with many unsavoury actors wanting to cheat us (with scams) or harass us (with spam) orotherwise grab our attention.

Cyber citizens are traversing this public space with increasing care and some are deciding not to enterthis public space at all (see below). Some are choosing not to go online, even to go to a secure privatespace. There is concern that the security of the private space in the cyber infrastructure does not bear thesame resemblance to the security of the private space in industrial infrastructure.

Online banking does not offer the same sort of trust and confidence as "bricks and mortar" banking.Online shopping, while convenient, means giving up credit card information to the uncertainty of cyberspace. How certain is the shopper that the information has not been intercepted; that the web site is the"real" web site and not a replica created specifically by criminals?

We contend that a sustainable cyber infrastructure cannot be achieved on such a shaky foundation oftrust, and that unless steps are taken to increase trust and confidence, then citizens are likely to eschewthe "convenience" of the online world for the "inconvenience" but increased security of the offline world.

Living in a world of distrust is costly. This will hold true for the online world, as it held true earlier andholds true now for the offline world.

Going further to the home space of the cyber citizen, the home computer. We know that if a person'shouse is broken into, the police are called. It is a crime. But what if some spyware, in the form ofunauthorized tracking software, has been unintentionally downloaded into the computer? Equivalent to abreak in or to the crime of trespass, it is unclear who is responsible and how the criminal act will beaddressed.

Can we reasonably expect that a secure cyber infrastructure can be run in a "wild west" fashion whereeach person is individually responsible? It seems unlikely. More likely is that we are still in an "institutionbuilding" period. A time when new institutional mechanisms in the public and private sectors will becreated to deal with rights and responsibilities of public and private space in the cyber infrastructure.

Steps taken today and tomorrow by public and private actors will determine the characteristics of theonline world. Perhaps the "dark and dangerous" public spaces will remain so and citizens will be willing topay extra to enter a sort of "gated community" in cyber space. A private network with rules andregulations and methods of enforcement. Those who enter want and are willing to pay for the trust andsecurity that they associated with the trust and security of the earlier infra-structure.

Or perhaps an international body (such as the International Postal Union) will be created to oversee theInternet and to provide rules of the road. Such a body would be one of member states who agree toenforce and prosecute offenders who violate the rules of the road.

What ever course is taken it is clear that leadership is needed. To do nothing is to turn the playing fieldover to the cyber pirates, thieves and extortionists. It is a council of despair and threatens to dramaticallylessen the value of the Internet as a most valuable technology.

Issues and Challenges: Establishing an Environment of Trust and Confidence

". . commerce dies the moment, and is sick in the degree in which men cannot trust each other". HenryWard Beecher (1813 - 1887) US clergyman, abolitionist In "Webster's Electronic Quotebase," ed. KeithMohler, 1994.

The exchanges that take place between buyers and sellers of goods and services are the lifeblood of aneconomy, just as the exchanges that take place between citizens, their elected representatives andproviders of public services are the lifeblood of a polity.

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For an economy or polity to work well, the parties to these different kinds of exchanges must trust eachother and have confidence that the institutional framework within which they are operating is stable andthat it will yield consistent, reliable and predictable results.

Countries around the world, as well as international bodies such as the OECD are all trying to develop aformula which will lead to an environment of trust and confidence in the electronic marketplace.

Canada has also developed a "shopping list" of what sorts of things are needed if trust and confidence isto prevail in the electronic marketplace.

I offer the following as illustrative of one country's approach.

One of the key objectives of Canada's Electronic Commerce Strategy was to start the process of creatingan environment of trust in which individuals and businesses would have as much confidence in theworkings of the digital economy as they have in the workings of the traditional industrial economy.Creating this environment is a complex, evolving and ongoing challenge. Among other things, it involvesmeasures to:

authenticate and authorize parties to transactions;

protect the privacy of personal information and the confidentiality of corporate informationcommunicated or stored electronically;

ensure that networks operate reliably;

protect intellectual property rights in electronic goods and services, including developing theappropriate polices, practices and tools for digital rights management;

establish a legal framework for contracts to function electronically;

develop dispute resolution mechanisms that function effectively in an e-business environment;and

protect individuals and businesses against annoying or abusive practices, such as unsolicitedbulk e-mail (spam).

It is clear that the cyber-infrastructure that is put in place has to be one that carries with it, at a minimum,the same degree of trust and confidence as the current infrastructure (physical, legal, institutional)developed for the industrial economy.

Creating Trust and Confidence

To a large extent, the creation of an environment of trust and confidence involves the application ofexisting laws, regulations and commercial norms to the electronic environment, through the amendmentor extension of existing instruments or through judicial interpretation. In some areas however, newinstruments may be required. Given this context, made-in-Canada approaches should work in concertwith general international cooperative initiatives.

Creating an environment of trust is not only the responsibility of policy-makers, regulators and the courts.As in any business environment, the private sector has a major role to play in its own right and incooperation with government, in developing business norms, standards and codes of conduct, as well asin identifying and encouraging the adoption of best practices.

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In sum, the task of building an environment of trust in the digital economy is complex. It involves actionsto create an enabling legal and regulatory environment, to develop voluntary codes of practice, to educatebusinesses, consumers and public service providers and to create tools that are easy to use.

This can only be done if all stakeholders work in partnership. What makes it particularly difficult is to try todo it in "Internet time", as opposed to the slow, organic way in which the previous infrastructure wasdeveloped. Added to this, we are trying to retrofit a host of security features into an open system, theInternet, a system designed for convenience, research and ease of use.

It is like building a community without locks anywhere and suddenly learning that locks on doors, onstores, on banks - locks and security are needed everywhere. Also that a retrofit is needed, as soon aspossible, and that all players should "more or less" agree on the nature of the retrofit.

Spam and its Consequences

"Spam is more than a growing nuisance. It is a public policy issue that challenges governments, InternetService Providers (ISPs), other network operators, commercial emailers and consumers to work togetherin new ways - with each stakeholder group fully playing its part - to solve a problem that threatens theinterests of all." Report of the Task Force on Spam, May 2005.

As examples of the types of the problems currently besetting the Internet, let us consider spam and itsmore virulent cousin like identity theft.

The problem of spam, or unsolicited commercial email, has become the Internet issue du jour because ofits impact on email-enabled applications, which still constitute perhaps the most important use of theworldwide Internet.

Some 11 billion emails were sent daily worldwide in 2001; this number grew to over 36 billion in 2004. In2006 the figure is nearly 100 billion! Spam has been called a "growing cancer" on the body of the Internet;it has grown in volume to now place significant pressure on the Internet and its users.

Spam is an intrusive nuisance to consumers; it costs businesses money in the form of lost workerproductivity and their ability to market their products; and it harms Internet Service Providers (ISPs) andlarge corporate networks, because it uses up large amounts of bandwidth capacity and adds to technicalsupport costs. These problems are worsening every day because the amount of spam is constantly rising.

MessageLabs' estimates of the amount of spam as a percentage of all e-mail traffic have increased from8% of US emails in 2001 to some 80% of all emails by the end of 2004, with a monthly average of 73%.Brightmail, a subsidiary of the leading Internet security firm Symantec, estimated that in June 2004 spamaccounted for 65% of all Internet email. More recent estimates suggest that unsolicited, junk email on theInternet now represents some 80% of all emails sent.

Spam has become a significant worldwide problem that clogs networks, consumes resources and, due toits implication in virus distribution, identity theft facilitation and other criminal activities, significantly erodestrust in electronic commerce.

Estimates of the total cost of spam to the U.S. economy range from US$10 billion (Ferris Research) toUS$87 billion (Nucleus Research). The Radicati Group and MessageLabs have estimated the worldwidecost of spam to businesses at US$30.5 billion in 2006.

Other industry analysts estimate that the global cost of spam to businesses in 2007 will be around US$80 billion, in terms of lost productivity and increased network maintenance costs. Comparable figures forCanada are not readily available. However, it is clear that from the point of view of the spammer, this canbe an extremely profitable business, with a relatively low cost of entry and rates of return that can bestaggeringly high.

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This is why some have argued that to effectively combat spam, one must significantly change theeconomics of spamming through a variety of coordinated measures, transforming it from the currentprofitable business model into a cost-prohibitive business model.

The biggest potential cost of spam, however, is the loss of public confidence in Internet communications.At the macro level, spam is a direct threat to the viability of the Internet as an effective and trustworthymeans of communication. By providing a vehicle for illegal activities like identity theft, as well as for thecirculation of viruses and worms, spam undermines consumer confidence in e-commerce and electronictransactions between citizens and their governments.

The atmosphere of distrust created by spam and its more virulent cousins imposes significant direct andindirect costs throughout the economy. Consequently, spam is also a direct threat to continuing economicprosperity, to more efficient public services and to the smooth functioning of a global, digital economy.

An analogy can be drawn to the start of the 20th century, when business practices were based on letterscarried by the postal systems and telegrams for urgent communications. Signed letters and telegramshad standing in the courts of law. If every three or even four letters and telegrams out of five had beenfraudulent, could these business practices have continued?

A Pew Foundation study shows that some 52% of Internet users consider spam a big problem and some22% of email users have curtailed their use of email because of spam. Some businesses are consideringabandoning the Internet altogether, in favour of private and closed user group networks, for operationaland internal communications.

Such networks could evolve to provide a premium tier of Internet access and services, with guaranteedsecurity and quality of service, for those willing to pay, thus leading to a two-tier Internet. Some have saidthat, if left unchecked, spam will bring the public Internet to its knees.

Cyber-Crime: Phishing, Pharming and Identity Theft

"We can't go on business as usual, without risking the future of online commerce,?This is a watershedyear. Everyone you talk to understands that their data aren't safe." Avivah Litan, Gartner Analyst .

"The story that needs to be told is the larger, long-term threat to the American financial industry. It's acancer. It's not going to kill you now, but slowly, over time". Jim Melnick, Director of Threat Developmentat iDefense, quoted in the New York Times .

Identity theft is the criminal activity of assuming and using another individual's identity by wrongfullyobtaining and using someone else's personal information, with a view to committing a forgery or a fraudfor financial gain. Identity theft is facilitated by technology, and is a crime that takes a heavy emotionaland financial toll on individuals as well as eroding consumer confidence.

In the age of the global Internet, identity theft is often associated with email "phishing", where emailswhich appear genuine are used to lure consumers to look-alike web sites with the names and logos oflegitimate financial institutions, business and government agencies, for the purpose of stealingconfidential information which can then be used for financial frauds.

A nationwide US survey of 1,421 Internet users by the Pew Internet & American Life Project, conducted inJanuary-February 2005, found that some 35% of email users had received unsolicited email requestingpersonal financial information.

Phishers often contract with spammers to send out millions of increasingly sophisticated phony emailsdesigned to lure victims to reveal personal and confidential information. A successful phishing operationcould bring in thousands of fresh account numbers, along with other identifying details: names,addresses, phone numbers, passwords, PINs and mothers' maiden names. The richer the detail, thegreater is the value and the better the selling price.

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Similar in nature to email phishing, pharming seeks to obtain personal or private (usually financiallyrelated) information through domain spoofing. Rather than a consumer being spammed with maliciousand mischievous email requests to visit spoof Web sites which appear legitimate, pharming 'poisons' aDomain Name Server by infusing false information into the DNS server, resulting in a user's request beingredirected elsewhere.

The victim's browser, however will mistakenly show that he is at the correct Web site. This makespharming much more serious and more difficult to detect. Phishing attempts to scam people one at a timewith an email, while pharming allows the scammers to target large groups of people at one time throughdomain spoofing.

According to the U.S. Federal Trade Commission (FTC), identity theft is the fastest growing crime inNorth America that targets consumers. In 2004, some 246,000 consumer complaints were filed to theFTC related to identity theft, and it was the fifth straight year that identity theft topped the list of consumerconcerns. More recently the FTC estimates that about 10 million Americans have their personalinformation pilfered or misused in some way or another every year, costing consumers US$5 billion andbusinesses US$48 billion annually.

PhoneBusters is an anti-fraud agency run by the Ontario Provincial Police (OPP), the Royal CanadianMounted Police (RCMP) and the Competition Bureau, Canada. In 2003, 13,359 Canadians reportedbeing victims of identity theft & direct losses totaled approximately $21 million. Statistics gathered byPhoneBusters

in 2003 and the first half of 2004 indicate that the largest number of complaints surrounding identity theftrelate to credit cards or to false applications for credit cards (32%) and cell phones and false applicationsfor cell phones (10-12%).

The Canadian Council of Better Business Bureaus estimates that identity theft costs the Canadianeconomy approximately $2.5 billion (Cdn.) per year.

A February 2005 Ipsos-Reid poll reported that some 9 per cent or 2.7 million Canadians have beenvictims of identity theft at some point over their lifetime. Ann Cavoukian, Ontario's Privacy Commissioner,observed recently that the crime had "exploded".

She urged the Ontario provincial government to become the first in Canada to require private-sector firmsto notify customers when files containing their personal information have been put at risk through loss ortheft. In the US, the federal "Fair and Accurate Credit Transaction Act of 2003 (FACT Act)" is intended toaddress this problem. Eight US states have introduced similar legislation, while another 30 states havebills pending.

Recently, there has been a spate of reports in the US about stolen credit card numbers and the existenceof a thriving black market on the Internet in the trafficking of stolen credit card data. Thus the WashingtonPost reported that according to MasterCard International Inc., more than 40 million credit card numbersbelonging to US consumers might have been illegally accessed by a computer hacker and are at risk ofbeing used for fraud.

The breach occurred in late 2004 at a processing centre in Tucson, Arizona operated by CardSystemsSolutions Inc., one of several companies that handle transfers of payment between the bank of a credit-card using consumer and the bank of the merchant where the purchase was made. While the bankswhich operate the Visa and MasterCard consortia are subject to regulation by appropriate authorities indifferent jurisdictions, the operations of 3rd party service providers like CardSystems Solutions are notsubject to any similar regulation or public scrutiny.

Their operations are only governed by their contractual agreements with the credit card companies.Officials at MasterCard and Visa have accused CardSystems of not meeting agreed-upon computersecurity standards, and Visa has suspended its contract with CardSystems.

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The information that criminals siphon through phishing, pharming and similar activities - credit card andbank account numbers, as well as much raw consumer information such as Social Security numbers - isboldly bought and sold on the Internet through a thriving black market or Web bazaar.

No one is willing to estimate how many cards and account numbers make it to the Internet auction block,but law enforcement agents describe the market as "huge". The value of the data arises from its readyconversion into online purchases, counterfeit card manufacture and more elaborate identity-theftschemes. Stolen credit card numbers allow thieves to make quick, fraudulent purchases. The losses haveto be borne by the merchants, the credit card companies and ultimately the consumer.

A May 2005 survey of 5,000 U.S. online consumers by the Gartner Group, released on June 23, 2005contains a disturbing message for online retailers and bankers. More than 42% of online shoppers and28% of people who bank online are cutting back on their activity because of "phishing" attacks and otherassaults on sensitive data,.

About half of the US's 148 million Internet users believe they have received a phishing email, up 28%from a year ago, according to Gartner estimates based on its survey. Some 2.4 million online users havelost money to Internet scams, with total losses amounting to about $929 million in the 12 months ended inMay 2005, Gartner estimates.

According to the firm, Internet service providers and companies that serve consumers online now see 150to 200 different phishing attacks each week, four times as many as they saw just six months ago.

More than 80% of those surveyed said concerns about Internet security have reduced their trust in email.Of these, more than 85% delete suspect mail without opening it, suggesting that some businessessending legitimate email may be losing an efficient and low-cost method of communication withcustomers.

But the more obvious economic toll comes in consumers' increasing distrust of e-commerce and onlinebanking. According to the survey, 33% of online shoppers concerned with Internet fraud are spendingless money than they would if they weren't concerned, and 77% of concerned online-banking customerssaid they are using online banking services less frequently. More than 4% of those Internet bankingcustomers concerned with fraud have abandoned online banking altogether.

In a recent article the New York Times describes the workings of this Internet black market, through siteslike http://iaaca.com),whose name is a shorthand for International Association for the Advancement ofCriminal Activity (IAACA)! The online trade in credit card and bank account numbers, as well as rawconsumer information is highly structured.

There are buyers and sellers, intermediaries and even service industries. The players come from all overthe world, but many of the web sites where they meet are run from servers located in the former SovietUnion, making them difficult to police.

At a symposium on cyber-crime on May 2005 Jody Westby, the Managing Director of security and privacypractices at PricewaterhouseCoopers, claimed that based on FTC statistics and credit card theft, onlyabout 5% of cyber-criminals are ever caught ."We are not making an impact?

The criminals are too hard to track and trace, too hard to prosecute, and the information they steal is tooeasy to use". If this view proves to be correct over time, then cyber-crime could become the Achilles heelof the global electronic payments system.

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Technological and Business Solutions: Tiered Networks?

"Expanding premium business services and offering customers new applications requires aninfrastructure that removes the limitations of today's internet and that offers connectivity along with QoS(Quality of Service), reliability and security assurances. Underlying open standards will make the power ofthe IPsphere (the proposed premium networks) a reality."Jochen Hagen |EVP, Product Management IP |T-Systems International

Although the Internet has changed all our lives, it was simply never built for commercial use. Discussionsabout the future of the Internet seem to go in one of two ways: how to make the existing network moresecure; or, failing that, the inevitability of introducing a separate Internet---Internet Secure?--one which isclosed, with security features built in from the beginning.

In this context, it is useful to distinguish between two broadly different classes of electronic networks:open networks and closed networks. In Annex 1 we will also deal in more detail with the concept of anIPsphere, an IP-based public network that combines the ubiquitous connectivity of the Internet with theassured performance, reliability and security of a private network, and its proponent the Psphere Forum.

Open networks, also referred to as public networks, have no restrictions on membership and are open touse by anyone willing to pay the established tariffs and abide by certain Acceptable Use Policies (AUP).

They require the intervention of some sort of outside agency, usually a regulatory agency or policingfunction of government. This is to create and enforce standards and to regulate the behaviour of thoseusing the network. The public Internet, a global network-of-networks consisting of over 50,000 looselyconnected, IP-based networks spanning every country, is currently the best known example of an opennetwork, but there are others which merit further study.

One characteristic of the public Internet as it is presently run is that it has no well defined policingmechanism ( a "they"), which can impose and administer sanctions for improper use such as spammingand phishing. In this sense the Internet differs from anything we currently know about in the "bricks andmortar" world. In every venue in our current world, there is a "they" that can step in if there isinappropriate or unlawful behaviour. In the Internet there is an absence of a "they".

Closed networks support the operation of a single entity (e.g. American Express, IBM, ATM networksdedicated to a single bank) or an existing closed user group, such as an association of financialinstitutions or airlines (e.g. SWIFT, Visa, MasterCard, SITA).

Closed networks such as SWIFTnet or the Reuters currency trading network, which handle well over $1trillion of financial transactions daily, are designed to provide and guaranty the necessary operationalfunctionality, reliability and security for the members of the closed user group.

There is a well defined policing mechanism ( a "they") responsible for the design and operation, as wellas overseeing the appropriate use of the network. Such networks are usually self enforcing, governmentshave a minimal or no role in their operation and the public is usually unaware of either the working of thenetwork or when sanctions are administered because of transgressions.

One business model, which could provide a solution to many of the problems currently plaguing the publicInternet, is a multi-tiered network. As stated earlier, some businesses are considering abandoning relyingon the public Internet altogether, in favour of secure private and closed user group networks foroperational and internal communications, with a secure gateway to the public Internet.

The proponents of this concept claim that such networks could evolve to provide a premium tier ofInternet access and services, with guaranteed security and quality of service, for those willing to pay. Thiswould lead to a two-tier Internet. As long as the new premium blended nets are IP-based, controlledgateways between them and the public Internet could be designed with relative ease. This could be alogical business and technological solution. Whether this is a desirable solution, from a public policy andwelfare point of view, needs to be debated further.

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It should be noted that the current "bricks and mortar" world consists of a broad and near infinite range ofsecurity for businesses and consumers, customized for various needs. From open commerce on thesidewalks to the security of the bank, there is a range of ways of buying and selling that carry more orless security and carry more or less cost to ensure that security.

We may well be on the verge of witnessing a similar development in cyber-space. This would result in arange of security enabled services, with protections customized to the requirements of applications andpaid for by various interested parties throughout the networks.

IPspheres, earlier referred to as infranets, are IP-based networks that combine the reach of the Internetwith the assured performance and security of a private network. They provide another variant of the multi-tiered Internet business model, which is supported by a number of major service providers.

The IPsphere Forum, which formally came into existence on June 28, 2005, is an initiative of industryleaders focused on driving the development and implementation of IPspheres.

This new approach is designed to overcome the current limitations of the Internet, delivering an enrichedexperience for consumers, business-critical performance, and opening new markets for service providers.It is expected that ultimately service providers will connect IPspheres together to create a single, globalmeta-network capable of carrying ALL communications.

However, the IPsphere concept is still in its infancy, and a migration path from the current public Internetto an IPsphere world would still have to be established and implemented.

The Role of Governments

"To say that governments and their law enforcers should stay out of cyberspace is as naive as sayingthey should stay out of city centres ... The Internet may be the cleverest infrastructure the world has ever

known, but it is not a world apart." Editorial in the New Scientist, May 8, 1999.

"... Similarly, Government cannot simply regulate to achieve its aims in this new global economicenvironment. This Report, therefore, recommends a light regulatory touch.

Enough to build confidence in the new way of doing business and to protect consumers, but not so muchthat we stifle innovation, creativity and entrepreneurship and drive industry overseas." Prime MinisterTony Blair, Foreword to the UK Cabinet Office report ecommerce@its.best.uk , September 1999.

Driven by the economic importance of networks and information technology, many governments arereviewing their policy frameworks in areas as diverse as telecommunications policy, competition law,Internet policies, intellectual property law and media regulation, broadband networking strategies, securityand public safety, and spectrum regulation.

The trend seems to be a movement toward frameworks that establish broad ground rules for investmentin modern networks and encourage network use within a competitive market environment, optimising theirapplication across technologies, industries and jurisdictional boundaries.

The historical role of governments in ensuring the orderly implementation of broad, general purposetechnologies which are enabling and transformative in nature, is well-known.

One need only consider the extensive frameworks of legislation and ways of behaving that surroundrailroads, electricity, the telephone and the automobile. For the Internet to achieve its maximum socialand political potential there will have to agreed upon and effective rules of the road, both nationally andglobally

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Government can play a critical role in developing and determining marketplace rules for the digitaleconomy. Such rules can affect the pace of ICT based innovation as well as provide the foundation forthe development of a high level of trust and confidence which is necessary for the successful operation ofelectronic marketplaces.

Data protection and privacy, electronic signatures and authentication, spam and cyber-crime, includingthe threat of identity theft, have emerged as important areas where governments need to be eitherdirectly or indirectly involved in establishing such rules of the road.

The Canadian government has played a significant role in fostering the development of networkinfrastructure for today's information economy, as well as the ground rules that will be needed for anincreasingly network-based economy. Such rules must not only adapt to new technologies, but alsoreflect the global, borderless nature of modern trade and commerce.

Future economic growth, moreover, relies on a set of rules which are consistent and apply marketplace-wide. Accordingly, in order to maintain Canada's competitive position internationally, the government hasacted to make Canada a world leader in the adoption and use of electronic commerce, by creating apredictable and supportive environment that would ensure consumers and businesses feel comfortable,secure and confident in conducting commerce online.

Traditional policy and regulatory instruments are usually limited in their application to national or sub-national jurisdictions. In the absence of complementary actions in other jurisdictions, however, domesticrule-making for marketplaces which are defined by the conduct of Internet-based business, will havelimited effectiveness.

Thus, in order to meet national policy objectives effectively in areas such as data protection and privacy,electronic signatures, the regulation of spam and other offensive Internet content, and consumerprotection measures, governments need to coordinate and align their domestic regimes with those inforce outside their own jurisdictions, both bilaterally and on a multilateral basis.

The public policy challenge for governments rests on their ability to redesign the ground rules for theconduct of international business - first, by adapting the traditional trade rules and disciplines developedthrough bodies such as the World Trade Organization (WTO) and in regional agreements such as theFTAA, to the realities of a networked international economy dominated by e-business, and secondly, toharmonize the operation of domestic legal, policy and regulatory frameworks with international norms.

The UN Working Group on Internet Governance (WGIG) has recently released a Report which will beconsidered at the World Summit on the Information Society (WSIS). The document makesrecommendations in a number of policy areas related to Internet governance such as: administration ofthe root zone files and system; allocation of domain names; IP addressing; interconnection costs andmulti-lingualism.

There are also recommendations relating to Internet stability, security and cyber-crime; spam or junkemails; data protection and privacy rights; consumer rights; intellectual property rights; freedom ofexpression; capacity building and meaningful participation in global policy development. The WGIG reportlays out four possible models for the conduct of global public policy and oversight of the Internet. Furtherdevelopments are expected at the WSIS.

Spam is currently the subject of legislative and regulatory action in the U.S., Europe and otherjurisdictions. It is an example of emerging issues which warrant rapid, flexible approaches from publicpolicy-makers. Rather than traditional regulatory approaches, Internet economy issues like spam requireconcerted action by governments and the private sector aimed at establishing practical rules of the game,and cooperative enforcement.

Business practices to protect customer information and prevent the theft of identification data are key tomeeting growing security problems. But business and consumer action is only one part of the solution.

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Governments must also take the necessary legislative steps to effectively address these issues, includingamending and strengthening existing legislation as necessary and working closely with businesses andconsumers. In Canada the Ministerial Task Force on Spam, in its report to the Minister of Industry, hasproposed a multi-faceted strategy for combating spam.

The implementation of its Recommendations will require a coordinated and concerted approach amongall stakeholders.

So serious is the threat of spam and cyber-crime that cooperative, multi-jurisdictional enforcement of civiland criminal sanctions will most likely be required to stem the tide.

Ideally, due to the borderless nature of electronic markets and services, such marketplace rules shouldwork both domestically and across international boundaries and thus facilitate the seamless flow ofcommerce across a networked business environment.

The economic interdependence resulting from globalization and the increasing prominence of informationand communications technologies in trade and commerce has magnified the importance of havinginternational legal, policy and regulatory ground rules which govern the working of the global informationeconomy.

Key Findings and Conclusions

The combined forces of technological change and globalization pose dramatic new challenges for publicpolicy. The widespread deployment and use of the Internet by businesses and consumers has lead to theemergence of a borderless, international marketplace which operates across multiple borders and legaljurisdictions.

While a major factor in stimulating productivity and economic growth, the emergence of an Internet-basedglobal economy poses important new challenges for governments everywhere. In the first instance, anetwork-driven economy raises new policy concerns in areas like network access and availability, as wellas the protection and security of information.

Secondly, to reach its full economic potential, the networked economy relies on establishing a completeset of consistent ground rules for the conduct of electronic trade and commerce that will apply seamlesslyacross the entire marketplace, not only within but also between territories and jurisdictions.

In some respects, the Internet is similar to other ubiquitous and trusted communications networks of theindustrial era that came before it. But there is a key difference. Previous transportation andcommunications networks were birthed under the watchful eyes of regulatory or legislative bodies, at thenational level or through international agreements.

The Internet has evolved at an unprecedented rate and it consists of an agglomeration of autonomousand apparently self-regulating networks. However, there is no gatekeeper or "watchdog" person oragency to oversee activities on the Internet: a "they" that can step in when governance or "policing" isnecessary to curb inappropriate or criminal use.

It is a profound challenge to retrofit this necessary functionality while the Internet continues to expandrapidly and its proponents try to accelerate its adoption and use by increasing numbers of unsophisticatedusers.

Although the Internet has changed all our lives, it was simply never designed and built for ubiquitous andglobal commercial use. While the technology is new, the need for trust and confidence carries over froman earlier era.

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A sustainable cyber infrastructure cannot be achieved on a shaky foundation of trust, and unless stepsare taken to increase trust and confidence, then citizens are likely to eschew the "convenience" of theonline Internet world for the "inconvenience" but increased security of the offline world and the privatenetworks.

Spam has become a significant worldwide problem that clogs networks, consumes resources and, due toits implication in virus distribution, identity theft facilitation and other criminal activities, significantly erodes

trust in electronic commerce.

If left unchecked, spam will bring the public Internet to its knees. Cyber-crime, Internet fraud and identitytheft are likely to become even more serious problems. Cyber-crime could become the Achilles heel ofthe global electronic payments system.

Living in a world of distrust is costly. This will hold true for the online world, as it held true earlier andholds true now for the offline "bricks and mortar" world. It is clear that the cyber-infrastructure that is put inplace has to be one that carries with it, at a minimum, the same degree of trust and confidence as thecurrent infrastructure (physical, legal, institutional) developed for the industrial economy.

The task of building an environment of trust in the digital economy is complex. It involves concertedactions among many stakeholders: to create the requisite legal and regulatory environment; to developvoluntary codes of practice; to educate businesses, consumers and public service providers; and tocreate tools that are easy to use.

For the Internet to achieve its maximum social and political potential there will have to be agreed uponand effective rules of the road , both nationally and globally. This new technology will have its own uniqueregulatory framework, but it will only flourish if there is some early agreement and acceptance of bothbroad and specific governance approaches aimed at buttressing the vital areas of trust and confidence.

E Commerce

eBusiness - A New Digital Economy, Not a Passing Fad

“The new economy is not just a dot.com thing. It’s not just about high tech –making computers or microchips. What it is about is new ways of doing things inevery industry, every government. It’s about speed, quality, flexibility, knowledgeand networks. It will affect everything.” (Collaborative Economics)

“The new economy organization is virtual and anti-bureaucratic, emphasizingcommunication via networks, and near-real-time transactional speed.” (RubinSystems/Meta Group)

“Many firms embrace the Net as a new channel, while others shape entirely newbusiness models around it. But these steps are just the start of a profoundtransformation, as the Net forces firms to rethink ingrained business practices.”(Forrester)

“The Net will give rise to a new market structure. In this new environment, firms will formrelationships quickly, share information broadly, and create value by making assets fullyavailable online. To thrive in this dynamic setting, companies will single-mindedly focus ontheir key strengths – actively plugging in partners to fill the gaps.” (Forrester)

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eBusiness - The New Digital Economy

eBusiness is a fundamental shift in the way that business is done – aided, abetted,supported, and enabled by technology, data, process and organization; the Internethas been the catalyst for the shift to a new Digital Economy

New Digital Economy – Next Wave of Change

Technology – Waves of Change and Business Value

First Era: Foundation (Efficiency and Effectiveness)

First Wave – Mainframe and Midrange Computing

Second Wave – Personal Computers and Client/Server Computing

Second Era: Innovation (Strategic and Transforming)

Third Wave – Internet/Network Computing

Fourth Wave – Pervasive Computing

Source: Assessing the strategic value of information technology,

The Economist Intelligence Unit

Digital Economy Characteristics

Characteristics of the new Digital Economy:

Technology is a given

Globalism is here to stay

Knowledge builds wealth

People are the most important raw materials

There’s no such thing as a “smooth ride”

Competition is relentless

Alliances are the way to get things done

Place still matters, but for different reasons

Source: The New Economy: A Guide for Arizona, Morrison Institute

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Digital Economy Indicators

Key Indicators for the New Digital Economy:

Knowledge Jobs

o Qualified engineers; availability of IT skills; availability of senior management;higher education requirements

Globalization

o Reduce economic and trade barriers; embrace global capital market; English willlose position of dominance as language of choice in favor of diversity oflanguages

Economic Dynamism and Competition

o Worker innovation; process management; entrepreneurship; overall productivity;companies’ financial health; venture capital

Transformation to a Digital Economy

o Connections to the internet; digital transactions; investment intelecommunications; virtual relationships; innovative business environment

Technological Innovation Capacity

o Increase in knowledge and technological innovation; increase expenditures onR&D

Source: The Global New E-Economy Index: A Cyber-Atlas, META Group

o e-business strategy that is integral and supports the overall business strategy

o strategic partnerships to outsource non-core processes, create new market opportunities,build market share, or provide other products or services

o establishment of ebusiness networks that link business processes in real time, allowprocesses to reconfigure dynamically to respond to changing market conditions andopportunities --- allow to work with firms that are competitors, suppliers, customers, anddistributors

o speed to market - recognizes time is short; acts quickly and proactively

o strategic investment in technology to enable new business model

o reallocation of IT resources from maintenance to strategic focus

o straight-through processing (STP) enabled by data and transaction standard

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Financial Services and Insurance Readiness

The question is no longer whether technology and the Internet will change the insuranceindustry, rather, the focus is on how rapidly the changes will occur and how otherfinancial services companies will take advantage of the lack of readiness of the insuranceindustry. Companies positioned to “win” have the following strategic technicalcapabilities:

BoeBusiness - Competitive Landscape

Insurance is besieged by new competitors including banks, securities, web startups,foreign insurers, aggregators, e-marketplaces, and non-financial services companies(LOMA)

Life insurers basis of competition has changed from product, distribution, pricing,investment performance, and ratings to attractive, low-cost products and high ratingswith technology as the differentiator (LOMA)

In a LOMA survey in 2000, it indicates the Internet importance for insurance will grow ascustomers increase use and experience of online banking and Internet sales of otherfinancial and consumer products

A survey of top executives indicates that 69% feel the top issue is how to effectivelyexploit e-business strategies and new business models (The Conference Board)

eBusiness – Competitive Assessment - Examples of Insurance and BankingIndustries

The Insurance Industry Has a Short Window of Opportunity to Compete in a Fast-changing and Consolidating MarketplaceSecurities

70’s - began automation

Develop common industry data and transaction standards

By mid 90’s seamless integration and web-enabled transactions

Growth increased

Customer Base increased

Product innovation increased

Householding - brokerage account

Costs decreased

Profits increased

Cross/sell increased

Offering other non-securities (I.e. insurance and banking increased

Customer/external focus

Partnerships increased

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Extensive online sales, service and distribution capabilities

30+ years to get to this point

Banking

80s - began automation

Develop common industry data and

By mid 90’s seamless integration and web-enabled transactions

Growth increased

Customer Base increased

Cross/sell increased

Costs decreased

Profits increased

Householding - Accounts

Non-banking products increased

Customer/external focus

Partnerships increased

Extensive online sales, service and distribution capabilities

20+ years to get to this point

Window of opportunitywas 30 yearsWindow of opportunitywas 20 yearsInsurance

Mid 90’s internal systems and begin sales force automation

No common industry data or transaction standards

Cannot do seamless integration

Growth flat or decreasing

Customer base flat or decreasing

Profits flat or decreasing

Minimal householding

Minimal cross/sell

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Minimal partnerships

Primarily insurance products only

Minimal product innovation

Product focus

Internal focus

Minimal online sales, service and distribution capabilities

Window of OpportunityIs Only 3-5 yrs

eBusiness – Customer ExpectationsCustomer expectations are no longer simply a contract or a relationship,they are a collection of services that are connected via technology –any time, any place or any way they desire …

Consumer demographic changes – customers who control their financial services; consumerswho prefer electronic interactions; consumers who internalize the Internet to their life; consumerswho want information and interactions in their native language (LOMA and Forrester)

Massive wealth creation, wealth transfer, deregulation, and global demographics create hugeopportunities for those with vision, resolve and aggressiveness in the new e-marketplace(Anderson Consulting)

Open Finance where consumers enjoy best-of-breed financial service combined with easyelectronic movement of money.

Consumers want their transaction-heavy accounts (checking, savings, and brokerage)aggregated. They see benefits to centralizing their less active accounts: 73% of life insuranceowners say that they would aggregate that information (Forrester)

Average US household maintains 3.7 accounts across three+ financial institutions. With higherincomes and more assets, online households have 1.4 more financial relationships, and own twomore financial products than offline consumers (Forrester)

Yodlee, a leading aggregation service, claims to consolidate more than $10 Billion in customeraccounts

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eBusiness - Customer Expectations

Emerging Market of Future Customers who will demand better information and choice, arethe future growth for financial services, and will represent an estimated 53% ofhouseholds (Forrester)

o Validators – Customers who do not delegate control, self-sufficient

o Digital Preferred – Customers who prefer electronic to physical interactions

o Young Consumers – Under 25 segment who internalize the Internet into their lives

Historic surge in customer competence places increasing strain on traditional businessmodels, which are optimized for a bygone era of information scarcity and are now ill-suited to the information-driven market (IAB ….)

o There is a market shift in power from sellers to buyers

o Almost half of computer owners use a PC-accessed tool to monitor their finances(Forrester)

o In a survey of 1000 users of account aggregation, one-third used an aggregator websitenot run by a financial institution (Booz-Allen & Hamilton)

30 percent of U.S. insurers offer three or more distribution

BeBusiness Success – Financial Services NetworkWill you be positioned to add value to your customer through a network that will accommodatethe need for immediate transactions between financial services and other organizations?BoeBusiness Success - Competitive Positioning

Few traditional providers are prepared to realise full potential of eBusiness

Insurance providers need an enterprise-wide approach

Spending on eBusiness technology per company will rise on average by 89% over the next threeyears (from $12.3M to $23.2M) and will rise from 31% to 42% of total IT spending;

Deepening customer relationships and cutting costs are top priorities

Larger numbers will rely on outsourcing for eBusiness capabilities

Alliances will become increasingly important

Providers will offer more advanced customer services online

Agents and brokers will continue to dominant distribution; will choose to do business only withcarriers that can work with them online

Carriers will broaden distribution by developing multiple customer access points, will rely on awidening distribution channels especially partner websites, e-marketplaces, affinity groups andemployers

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Distributors and financial services companies will offer a complete portfolio of financial servicesonline

The Economist Intelligence Unit

eBusiness Success - Critical IT Management Issues

How can IT align IT and business strategy and goals?

How can IT work more effectively with the business to identify and exploit IT to create or improvethe business model?

How should IT organize and manage resources?

When and what should be outsourced?

How does IT effectively monitor emerging technologies to evaluate which - and when - to applythem?

How to determine the level of investment for eBusiness and optimize the returns?

eBusiness Success – 3 IT Management Components

PeopleIdentify training, recruiting, retention, and organization needs and changes to support the new businessmodel. Determine how to compete for scarce talent.

PracticesDetermine and implement relevant best practices in strategy, management, architecture, application

development, and security. Define a role for outsourcers and open source development.ProductsIdentify appropriate products, tools, and standards for all phases of development andmanagement. Evaluate emerging technologies and standards.

eBusiness Success – IT Strategic Alignment

IT Leads, but Who Follows?

High internal IT eBusiness investment

Solution seeking problem

High risk positioning

Needs integration with business strategy

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Discovery phase

Minimal eBusiness commitment

Localized investment

eBusiness Model

Fully virtual

Common business and IT planning and strategy

Optimized eBusiness model and business processes

Strategic Misalignment

E-vision without IT delivery

Dependence on ESPs

Lack of reengineered business processes

Dead-end business opportunity

Needs integration with IT

HighLowHighInternal Development of eBusinessExtra/InfrastructureExternalCommitmentToeBusinessModelSource: GartnerBeBusiness Success – Technology Management ApproachCompanyProcessesConnectionsCross-EnterpriseProcessesInfrastructureTrading PartnerSupplierCompanyCustomerSource: Forrester

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eBusiness Success – IT Management ChangesIT Management Changes to support eBusiness:

Requires IT to organize at the process level

o Connect external constituents to internal processes and data in real time

o Plug and unplug applications from multiple sources

eBusiness requirements expose traditional IT organizations – need to reorganize andchange culture to support information access, component strategies and businesscontrol over applications

o Decentralized access control to enable complex shared processes

o Technical demands exceed a firm’s IT capabilities

Internal process teams will merge business and technology management

o Manage and own business applications

o Employ and manage all staff, IT and business

External technology service providers are required and will span internal and externalorganization and system boundaries

o Operate complex and commodity technologies

o Own infrastructure and connection technologies

o Replace IT’s technologists

Source: Forrester and Gartner

eBusiness Success – Key TechnologiesTechnologies:

eBusiness standards: HTTP; XML; SOAP; CORBA; UDDI; J2EE; JAVA

Enterprise App Integration (EAI) – Intelligent routing, content translation/transformation,process flow control, middleware brokering

Voice, telephony, interactive voice response, intelligent routing

Content Management

Personalization, search engine

High resolution video, groupware

Security, Public Key Technology (PKI)

Enterprise portals; .NET

ZOOB; intelligent agent

ASP’s, ESP’s. MSP’s