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Article by Anil Lamba...

Old Economy Vs the Name

"Where there is much desire to learn, there of necessity will be much arguing, much writing, much opinions; for opinion in good men is but knowledge in the making"

- John Milton

"No army can withstand the strength of an idea whose time has come"

-Victor Hugo

We are living in interesting times. This generation is perhaps witnessing change that several generations before it has not. The innovations of the last decade, or perhaps the last five years, have radically altered our lives. Dramatic transformations have taken place globally in the way we live, work and communicate. Technology has made distances redundant, enabled unsurpassed reach, made hours and days of back breaking research unnecessary by making information available at the touch of a button, reduced costs, increased efficiences and made the world a global village where the only thing that appears to be of essence is speed.

Any new radical, far-reaching development or invention has historically been first viewed with disbelief, scepticism, resistance and awe before being finally accepted. What is amazing about the developments in the telecommunication and internet field is the ease with which all of us have accepted and adapted to this change and made it a part of our daily lives. E-mail has virtually replaced paper mail, mobile phone is no longer a luxury product. These innovations have quietly revolutionised our lives and have become an inherent part of our daily habits - can you imagine life without satellite television? For a short while the cable operators in Mumbai went on strike and the entire city appeared to go crazy.

Often when I hear people talk or read in newspapers and magazines that the future belongs to the new economy, and that the days of those engaged in old economy activities are numbered, I can't help feeling that maybe one is exaggerating a bit. Now, I am not a nerd or a techhie, nor do I claim to understand a lot about what is going on, and therefore am a bit wary of refuting straightaway what the pundits of this field predict. But rational thinking still says that the internet is but a medium, enabling hitherto unimaginable reach, knowledge and information; IT is not a mantra but technology, assisting in better research, more efficient systems and excellent quality control; but what use reach, to what avail technology, if there is not a producer on the one end and a consumer at the other end of the pendulum.

New techniques and innovations can, no doubt, help in making a better product, at cheaper prices, of world class quality, help in logistics management to reach it to the consumer in the shortest, quickest and the most cost effective way, assist in quicker processing of paper, more accurate accounting, facilitate transfer of funds at the speed of thought, but will still not eliminate either the producer or the consumer. Middle men, of course, will have to look for alternate professions.

And therefore what appears to be the need of the hour is e-transformation. All producers will not become redundant, but those who refuse to embrace technology, will.

What probably prompts the prophets of doom to make their dismal predictions is the witnessing of unrealistic growth among the so called "dot- com" companies caused due to the hype that was created partly thanks to the valuation of similar "dot-com" companies at NASDAQ and partly by the easy availability of money from cash rich venture capitalists who had set shop in India too. Consequently a lot of aspiring entrepreneurs jumped into the fray, not all of them with fully baked ideas. Clearly this kind of mushrooming could not be sustained. But, as would happen in any gold rush, when one sees a pot of gold at the end of the rainbow, and the distance to be traversed does not appear to be too uphill, there was a glut in the number of entrepreneurs seeking venture funding. Of these, there were some who wanted to use venture finance to make money and others who wished to make money from venture financiers. Any and everybody who had a net based idea, queued up for funding , forgetting in their haste to raise money, that while, unlike a traditional banker, a VC may not be interested in regular returns on his investment, he is nevertheless in this as a business, and unless the project has a top and a bottom line, it is not a viable proposition. Probably also due to the immaturity of some VCs, certain wrong projects, which never saw the light of day, got funded. This led to the inevitable shake-out, first, as usual, in the US, followed by a knee-jerk reaction in India. But what we have to understand is that this is a cyclical pattern every new idea goes through. When the PR machinery, wittingly or otherwise does such a wonderful job of selling the concept, in the euphoria that follows, more people than should, jump on to the bandwagon. Inevitably the wrong then have to be offloaded. But in the reversal, certain good ones get thrown out too, making place for some others to get on again, albeit lesser in number this time, and wiser from lessons learnt from others. And only then does a smooth journey begin. Therefore neither the building up of the bubble should be construed as nothing more than hype, nor should its bursting, in any way invalidate the concept. Besides, one must not forget that the new and the old economy companies are in completely different phases of their life cycles . While the new economy is in an explosive phase of growth and proliferation of ideas, the old economy is experiencing macro, steady growth.

The internet has been hailed as a development of far greater significance than either the automobile or the PC. E-business in India will be restricted not because of a lack of opportunities but because of infrastructural barriers like limited PC, internet and telephony penetration. But then lets not forget that the world is our market. International Data Corporation (IDC) estimates that in India there will be 2 million internet users by December 2000 growing to about 20 million users by 2004 (Goldman Sachs puts this figure at 70 million by 2003). Compare this with global e- commerce markets. IDC estimates suggest that by 2003, developed countries will account for 89% of global business-to-consumer (B2C) e-commerce revenues, and 97% of the global business-to-business (B2B) revenues.

A look at the following tables should make even the hardcore sceptics re-think whether we can afford to miss the e-bus:

Total B2C	Revenues	US,Europe	Asia	1999-2003	In billions
Region	1999	2000	2001	2002	2003
US	75	150	250	400	750
Europe	25	30	40	50	60
Japan	25	30	50	75	250

Source : Fortune (International)

Volume of B2C in Asia- Pacific 2000-2004(excluding Japan)

Year Volume

1999 9.2 billion

2000 29.9 billion

2001 93.4 billion

2002 258.5 billion

2003 510.7 billion

Gartners B2BPredictions 2000-2004

Region 1999 2004

World 145 billion 7.29 trillion

US 63% of above 39% of above

Europe 31.8 billion 2.34 trillion

Asia-Pacific 9.2 billion 992 billion

Japan 11.1 billion 861 billion

Latin America 1 billion 124 billion

Lets face it, e-business is here to stay. It appears to be pervading almost all spheres of activity: e-commerce, e-banking, e-investing, e-money, e-learning, you name it. We either ride the wave or go under. The choice is ours.

View all articles of expert Anil Lamba

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