Net Economy Casts Wide Net

According to a study of the nation’s Internet economy by the University of Texas Business School and commissioned by Cisco Systems, sales and marketing staff made up one-third of Internet economy employees in the first six months of last year. Overall, the study found, seven in 10 jobs are held by traditional, as opposed to information technology, workers.

That’s among the surprises found by UT professors Andrew Whinston and Anitesh Barua, who work for the Center for Research in Electronic Commerce. The researchers, who’ve authored four such studies for Cisco, say the Internet economy — a rough measure of revenue created by companies and technologies using the Net — grew 58 percent in 2000. They figure the Net is now responsible for the employment of 3.1 million US workers and generated 2000 revenues of $830 billion.

And while the IT economy certainly slowed down in the second half of the year, the researxhers say no one should be overly concerned by dot-com layoffs. According to their numbers, dot-coms make up less than 10 percent of the Net economy.

“The Internet economy will continue to grow due to the inflow of traditional companies doing business online,” Whinston said. “Companies that invest in Internet technologies change their processes. As the economy gets more challenging for those companies, we believe it will spur mainline companies to be bigger players in the Internet economy.”

The professors break the Net economy into four sectors: infrastructure (companies such as Cisco and Lucent), applications (Adobe, Oracle), intermediaries (Yahoo, E*Trade), and commerce (Amazon, as well as the online sales of brick-and-mortar firms like Wal-Mart). Critics say that can lead to double or even triple counting of revenue — as if in tallying up the impact of creating a loaf of bread on the economy one tallied sales of the unmilled wheat, the flour and the bread itself.

The study does lead to confusion in terms of how large a percentage the “Net economy” makes up of the total US economy. The authors say that one in five dollars of corporate revenue now is generated through the Net. Yet their 2000 revenue estimate of $830 billion is less than one-tenth of US gross domestic product.

The authors say they take into account the potential for double counting, subtracting the overlap when they combine sales from the four sectors. And they say they’re not estimating GDP figures, which calculate value added to the economy rather than simple revenue growth.

In any case, while 3.1 million workers totals just about 2 percent of the US workforce, it seems clear that employment and revenue growth of the Net sector far outpaces the rest of the economy.

The authors also claim impressive gains in Net worker productivity. They say Net economy revenues are growing more than twice as fast (58.8 percent in the second quarter of 2000 compared to the second quarter of 1999) as Net economy employment (up 22.6 percent in the same period). While Net commerce accounts for the most jobs from among the four sectors (just over 1 million in the second quarter), infrastructure accounts for the most revenue ($75 billion in the second quarter), the report calculates.

More complete results are available at www.internetindicators.com.

Reprinted from internet.com’s boston.internet.com.

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