Who's ready for the revolution?

UK businesses know electronic commerce is the future, says Peter Koenig. That doesn't mean they're about to embrace it

Bill Hill, who grew up in a lighthouse on the island of Little Cumbrae in the mouth of the river Clyde, hated technology as a teenager. "When I was 14 the Little Cumbrae lighthouse changed to trickle-charged batteries and a photo-electric cell switch. Technology robbed my Dad of his job."

Hill has, conversely, spent his adulthood embracing technology. At 38, after 14 years at the UK subsidiary of US computer giant Hewlett Packard, he has risen to a position enabling him to do what he will do this week - take his wife and two young sons skiing in Italy. "I'm getting my own back," he jokes.

The residue of alienation that comes across when he discusses the "digitalised world" offering "total connectivity" makes him effective at his job - selling Hewlett Packard's high-tech products to thousands of small and medium-sized businesses run by men more alienated from technology than he is.

Hill's posture as an outsider crashing the information technology party also makes him an interesting commentator on the internet and its commercial stepchild e-commerce as they crescendo as the business story of the moment.

How real are the internet and e-commerce as business tools? Very, Hill suggests. Can they, as New Labour suggests, catapult UK plc up the global markets ladder? Yes, Hill says. Will they? That, he says, depends on what's happening in businesses facing the daily grind of increasing sales and cutting costs beyond the media spotlight. So what is happening beyond the media spotlight? Hill has a view. First, though, the message in its undiluted form.

"The internet changes everything," Microsoft chief Bill Gates declared on Friday in a speech to students at the London Business School while promoting his new book, Business @ The Speed of Thought. The way it changes everything is something about which everybody, even those who hate technology, now has a vague idea. It's changing social mores.

"Have you ever met anyone on the internet?" the American comedian Jay Leno asks an attractive young Asian woman in an amusing promotional video Gates showed to LBS students.

"Yes," the woman answers.

"Was he a creepy 50-year-old?"

"Yeah, he was about 50," the woman answers. "But he wasn't that creepy."

The internet is driving the world's stock markets.

"What's the internet do?" Leno asks a black American teenager.

"It's making Bill Gates rich," the teenager replies. "Rich like Oprah."

The point about the internet, however, according to Gates, is that it will radically transform the way business is done. No more office drones. "Everyone will be a knowledge worker," he proclaims. No more wasting time calling meetings to pass on information in an "information-poor environment". Information will be readily available to all on the net. "Meetings will be more brainstorming sessions," Gates says.

And, of course, all this is just beginning. There are now 153 million people on the net worldwide, Gates says. Twenty-nine per cent of the US is online, he adds. In 1998, 18 per cent of the UK population used the internet, NOP research shows.

But the numbers are exploding. Moreover, the e-commerce that many businessmen think of when they consider the net - selling online - is only part of the picture. The net is for heavy lifting, too. Businesses will soon transfer endless numbers of functions: payrolls; all accounting. The internet equipment maker Cisco says it will soon be able to close its quarterly books two hours after the end of each period, because all its accounting data is online.

E-commerce will transform the relations between a business and its suppliers as well as its customers, Microsoft asserts. "Twenty per cent of net activity is business-to-consumer," says Microsoft Ltd's group marketing manager, Andrew Pickup. "Eighty per cent is business-to-business."

Nor is Microsoft alone in cheerleading the e-commerce revolution. On Thursday, Sun, another Silicon Valley software powerhouse, sponsored a "financial summit" during which the company and a variety of its bank and insurance customers offered their perspectives on the net.

"The web is everything," declared Nigel Woodward, Sun's UK business development manager, in an almost exact restatement of Gates' message.

Woodward, like Gates, markets his company by disdaining the sale of products and services in favour of a more lofty approach. Last week he was selling "strategic partnerships". He was selling a revolution with the implied threat that those who did not heed his call would be done for.

In fact, Woodward's message dates back to the 1970s - when Walter Wriston, the former chairman of US bank Citicorp, stunned the financial community by declaring that banking was not about money; it was about information.

Sun emerged on the back of this redefinition of financial services. In the 1980s it began building and selling personal computers powerful enough to help stock, bond, futures and options traders conduct their increasingly abstruse calculations - comparing value, say, in the yen calls against sterling puts.

By the mid 1990s Sun had evolved from a computer maker into a seller of "platforms" through which networks of computers could communicate. It has positioned itself to be at the heart of all commercial activity generated by the internet. Indeed, it has become Microsoft's bitterest rival - offering a world in which a high proportion of e-commerce happens either through Java, an open software system allowing virtually all-comers, or Windows, Microsoft's dominant but proprietary system.

For all the rivalry, however, Sun and Microsoft are singing from the same hymn sheet. On Thursday James Bressler, Sun's global head of sales to financial firms, sketched a world in which bank customers could execute share trades on mobile phones, buy mortgages by clicking icons on PC screens, and manage secret Swiss bank accounts through secure internet messages to their personal gnomes in Zurich.

The so-called war between Microsoft and Sun, then, is partly real, but partly a circus act to keep the shouting about the internet going. One question for businessmen is whether they should buy Windows or Java. Another is how closely they should listen to either company.

This is where Bill Hill re-enters the picture. As the man responsible for selling Hewlett Packard products to small British businesses - those with a maximum of 150 employees - he is outside the internet action among Footsie 100 companies: the high-street banks, the big retailing chains, the supermarket chains. But he is an expert on how the e-commerce revolution is going in the hinterland. His verdict is that businessmen see it as real, but are terrified of wasting money by getting the wrong end of the stick through ignorance.

Hill is addressing this concern through a network of Hewlett Packard office centres - resellers of IT equipment selling "solutions". One Hewlett Packard solution is Instant Office, a joint venture with BT that gets small businesses online for electronic communication in two days. Another is NetConnect, a package that gets small businesses on to the web for electronic selling.

Hill is sceptical, however. Hewlett Packard sells its own products on the web, but despite a regular drumbeat of hits on its website, few UK customers are ready to part with cash on an internet transaction. One of Hill's distributors, Edward Osicki, a director of Tech OP in Cheltenham, reports that only a tiny fraction of the small businesses which make up his clientele have anything to do with the net. "Whatever the cheerleaders say, e-commerce is not material to the average businessman in this country," declares Andrew Godfrey, a business development manager at accountants Grant Thornton. Godfrey's opinion is that the e-commerce revolution will only hit these shores for real in two to three years.

The issue, then, is how British business embraces the internet over the next 24 to 36 months. If enough businessmen make the right decisions, UK plc could gain substantial ground on its overseas rivals.

But the internet is not necessarily the great levelling commercial force its cheerleaders declare it to be. The net could help small companies compete with large ones by offering the world as a market to virtually everyone. The net could also mean that clever, not big, wins the day.

Equally, the financial and intellectual capital required to harness the net could create a world league of super companies leaving everyone else in its dirt. In the UK the net could widen, not close, the gap between Footsie 100 companies and everyone else.

Hill has come a long way from his lighthouse in Little Cumbrae. But he seems worried that not enough other outsiders in the business community are going to make the same journey.

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